How China could use its massive US debt holdings as a trade war weapon




 

China is currently the largest holder of U.S. government debt. It now owns $1.12 trillion in U.S. Treasury bonds. If China decided to sell off its U.S. government debt holdings as a form of retaliation in the ongoing trade war with the U.S. and President Donald Trump, it could upend global financial markets and drive U.S. interest rates higher. That's a measure some have started calling China's "nuclear option." China, however, has several reasons why it might not weaponize its bond holdings anytime soon.

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