The United States and China are in a confrontation of the commercial war.
The United States exported goods worth $ 143 billion to China in 2024 and has a commercial deficit of $ 295 billion.
To stop that, President Donald Trump has achieved tariffs on a listening never before or 145 percent in China, which has been retaliated with 125 percent taxes on US assets.
While Trump has stopped tariffs in most countries for 90 days, China is not on that list, increasing tensions between the two countries.
Earlier this week, the China Ministry of Commerce said it is willing to “fight until the end” and has accused the United States of violating the rules of the World Trade Organization.
For his part, Trump has said that rates are bringing $ 2 billion a day. According to the data of the Department of the Treasury, the tariffs have brought a day of $ 200Ma.
How can China defend yourself?
China’s nuclear option revolves around the United States debt. China is the second largest head of the US debt, also known as Treasury Bonds, at $ 760 billion. Countries like China like to buy American debt because the dollar is considered the standard currency in international trade and, therefore, a low risk investment. China is only the second in Japan, which has $ 1 billion, according to the United States Department of the Treasury.
Theoretically, treasure holdings of the United States could arise, when undoing it, which means that it would sell treasure holdings for less than they are worth. In doing so, China then, due to the amount it has, will devalue the US dollar.
“As tariff barriers become so prohibitive that we can no longer access the markets of each Ostother, the only source of climbing ball that ruins the retaliation tools,” such as selling debts from the United States for less politics and defense in the group of economic experts, the base collective.
“That might not have only national but global consequences and really children or unforeseen,” Jacquez said.
James Mohs, Professor of Accounting, Taxes and Law at the University of New Haven, says it could be worse if China would buy more the debt that the United States can issue.
“If we have to issue more debt, that will weave our economic structure. Whether the course is probably, the dollar because it is a pure amount of excess debt,” Mohs told Al Jazeera.
However, it is not clear that China will continue on that route of selling treasury bonds. Such movement would damage China, devaluing its dollar assets and strengthening the Yuan. That would damage global and national economic production, since it would make Chinese expectations more expectations.
China does not do it because it is currency at a high value because the US dollar is the standard of global trade, which means that it would earn more money with the currency of another country instead of its own. However, having so much debt from the United States, approximately $ 3 billion among state and national banks, China automatically has an leverage about the value of the dollar.
How can the United States Federal Reserve respond
Even if China made such movement, the United States Federal Reserve could quickly counteract the damage through aggressive quantitative flexibility (QE). According to QE, the Central Bank injects money into the economy by buying key financial assets such as government bonds to reduce interest rates and stimulate economic activity, since during the peak of the Covid-19 pandemic.
But with the daily changes in tariffs, the decision -making of the Central Bank is in flow. The Federal Reserve has indicated that it will probably not press the cuts of interest rates at any time. Morgan Stanley predicted that the Fed would not make any cuts for the rest of the year.
“It’s hard for them [the Federal Reserve] To plan what they could do at this time, since the president is not an appeal to know what he will do day by day or week, “Jacquez added.
Amid all chaos, consumers are beginning to go back. The consumer’s feelings index of the University of Michigan, which came out this morning, shows a 11 percent drop last month amid the concerns about a commercial war would mean in matters ranging from personal inflation.
The report is far from being the only metric that shows that the American public is worried. The Conference Board reported at the end of last month that consumer confidence fell to a minimum of 12 years.
“If each news headline is negative, and there are threats of nuclear options by China or other commercial partners, consumers will begin to withdraw the expense,” Jacquez said.
