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.