US - China Trade War ( What Happens If China Sells US Treasury Portfolio)
The US-China trade war is becoming a tensed one with the United States Threatening to place sanction on China over the origin of the coronavirus pandemic. It is true that the US and China have been going through series of trade wars in last 2 years because china seems to be affecting the US economy with importations. As at today, the stock market dropped over the tension between the two great nations.
The United States and the People’s Republic of China have always been in a mix event and having this trade war might not be the last we might hear about this two countries having mix issues. Since 1949 when Mao Zedong established the People’s Republic of China, The US have always been tense standoffs on China.
Although this trade war might improve America local productions but will China be willing to leave without a fight?
The United States is in so much debt but the most interesting part of it is that China is the United States biggest creditor follow by Japan. In case you do not know, the US is in a debt of $24 Trillion. The United States is in debt to China and you wonder why? Then let’s go back to the great recession in 2008, when China and Russia lent the United States money. China owned about $600 billion of the US treasuries but as the recession started, Russia sold their loans and also asked China to do the same but the Chinese government decided not to and fast forward to 2020, China now owned trillions of dollars of the United States debt.
What Will Happen if the Trade War Get Intense
People have been scared of the potential outcome to the United States economy if there is a trade war with China and this is on the basis that the China owns the a large amount of the United states Treasury portfolio and could sell it all.
What will happen to the United States?
If China sells the United States debt, it will affect the United State Dollar, it will hurt the United State Economy. Do not forget that the US is the one throwing the first blow here to China by placing Tariffs on China while China still holds an Ace card.
Why the fear?
In 2018, there was a trade war between the United States and China and The United States were scared of China selling off the United States Treasury portfolio after which everyone thought there would be a potential recession but that did not happen and now the US is on it again and this time they are more at risk because the economy is already shutdown and there is a confirm recession. What will now happen at this point if the trade war starts and china sells off the United States Treasury Portfolio? Maybe the economy will crumble completely.
