Summary of What Would Happen If China Started Selling Off Its Treasury Portfolio?

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What Would Happen If China Started Selling Off Its Treasury Portfolio? summary
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With trade tensions looming and China in the cross hairs of the Trump Administration’s tariff bazooka, one of many concerns involves the financial impact of a full-scale fight between the world’s two largest economies. China has several possible responses to US-imposed tariffs, and while retaliatory duties or currency depreciation are possible, economist Brad W. Setser previews a third option: Chinese leaders divesting the country’s $1.5 trillion US Treasury and agency securities portfolio. getAbstract recommends this insightful though technical report to analysts and economists for its nuanced look at fiscal and monetary policy salvos in a trade war.

In this summary, you will learn

  • How China might respond to US-imposed tariffs,
  • What impact Chinese sales of US Treasuries would have on the American economy, and
  • How the Federal Reserve would likely act to defuse such a threat.
 

About the Author

Brad W. Setser is a senior fellow at the Council on Foreign Relations.

 

Summary

In response to US trade deficits, President Trump has unleashed tariffs on Chinese goods, with talk of escalating the levies to $450 billion of Chinese imports. China can’t counter this move by slapping tariffs on an equal number of US goods, because the United States only exports $170 billion of products to China and Hong Kong.

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