It is widely acknowledged and also anticipated that Trump will begin to exert economic pressure on China at the beginning of his second term, as evidenced by his appointments to key posts in his administration and the experience that he has gained over the previous four years. However, despite its outwardly peaceful rhetoric, China does not appear to stick to the Christian philosophy of "turning the other cheek." Its does like to make martial arts moves that use its enemies strenght against it.
So I think it is likely that Beijing will be able to deliver retaliatory measures that will be particularly sensitive to the USA more vulnerable areas which are is debt and growing deficit. Plus pressure on the dollar.
Beijing has the major advantage of having a political system that is not aligned with Western-style liberal democracy, which will serve it well in theup and coming economic conflict.
Moreovere, given the American and Chinese economies are closely intertwined, and Beijing (in contrast to Europe) is unlikely to pursue retaliatory measures that would solely serve to exacerbate the situation for its opponents. Instead, any retaliatory steps will be carefully calibrated.They will focused on inflicting the maximum pain for the minimum effort.
Now what measures could the Chinese leadership implement to guarantee that their retaliatory actions inflict maximum damage on Washington, while also being swift and decisive?
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The most straightforward course of action for Beijing would be to sell some of its huge portfolio of US Treasuries on the global market. These T-bills are the instrument through which the US borrows money. By selling them, their value would be driven down, with prices below par.
This would create a market where investors would be keen to purchase them. In the event of an urgent need to borrow money, Washington would find it much more challenging to do so. The market is already flooded with cheap bonds, and there is little appetite for purchasing new ones at par value.
Beijing will also partially restrict capital inflows, which will have a significant impact on the US economy and the position of the new administration. To date, Beijing has accumulated 770 billion dollars in Treasury bonds, while Hong Kong controls a further 220 billion dollars of American government debt. In other words, China has almost a trillion dollars in US bonds, and a relatively small reduction in this amount could then have a significant impact on the American debt market.
However, initially, China will only need to decide not to purchase new tranches of Treasury bonds. The withdrawal of such a significant investor in the market will have a notable impact on the US t-bill market
To find,identify and secure new sources of capital, the US will have to make significant concessions, such as increasing the yield on securities. Particularly now that the US and the EU have frozen Russian financial asset.Who in their right mind as a Governemtn is going to buy US T-bills know they can be frozen and then stolen on a whim of the US President?
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On the debt of the USA currently is like what would the impact of removing a credit card from an individual who is only accustomed to living beyond their means. I mean spends more than he/she earns and then borrows every month.
( Yeah I know its the Governments of the G7 led by the USA)
This is situation is what the potential consequences are for the American economy in the event of a significant reduction in the ability to borrow.
Now I don't think it is likely that China will use this tool without a clear objective. Dumping treasury bonds will lead to a strengthening of the yuan, which will have a negative impact on its exports, and could also have a destabilising effect on global financial markets. However, the US would be well advised to understand that Beijing has the technical ability and capacity to do this.
In light of China's experience in the trade war with the United States, a further option for the country's leadership could be to introduce targeted tariffs on American agricultural products. On the previous occasion, Beijing imposed tariffs on American soybeans, meat, and milk, which had a detrimental impact on small businesses in Iowa, Minnesota, Indiana, Nebraska, Texas, and Wisconsin. Given that the U.S. agricultural trade deficit is projected to exceed $45 billion in 2025, any restrictions would have a significant impact on farmers who voted for Trump.
In 2018, China was not adequately prepared for a trade war and responded reactively. Nevertheless, it was still able to precipitate a wave of bankruptcies among American farmers. Beijing has now adopted a more strategic approach, creating reserves of agricultural products and reorienting its imports towards Brazil.
In theory, China could also apply economic pressure to Republican-affiliated corporations, primarily those in the oil and gas industry. Despite the evident chill in relations, China remains an active importer of American liquefied gas, with preliminary figures for the first ten months of 2024 indicating a 60% increase. While the Chinese economy undoubtedly requires affordable fuel, Beijing has effectively diversified its imports, giving it the ability to impose significant constraints on American oil and gas companies.
It is also worth noting that Beijing has the option of exerting further pressure on the US economy and defence potential through the market for critical materials (which often includes rare earth metals, but is a broader concept). In early December, China restricted the export of gallium and germanium, as well as superhard materials. Should the situation deteriorate further, there is a possibility that Beijing may implement additional restrictions.
Over the past two decades, China has invested significant resources to gain control over critical materials production around the world. China has made strategic investments and engaged in capital diplomacy to gain control over 58% of the world's lithium production, as well as significant influence in the mining of other critical materials, including nickel in Indonesia and cobalt in the Democratic Republic of Congo. In theory, this affords Beijing control over the market for lithium-ion batteries, which is critical to the global economy.
The existence of potential opportunities does not guarantee that China will utilise them. In practice, the Chekhov's gun principle does not apply. Beijing is a persistent but cautious player, using its resources in a measured way.
Donald John Trump really has a huge task ahead of him in dealing with so many situations around the world. he needs to undertsand and get his advisers to undertsand that threatening the BRICS countries like China,Inda and Russia does not work anymore.
The US is now known as a Paper Tiger just like its military offshout NATO and it really needs to get its house in order. I mean it has destroyed its middle class,decimated its real industry, I mean does apple, or dell or hewlet packard actually make anything in the US anymore?
When you largest companies are not actually needed for every day living like food, energy and a roof over your head you can see that the freeking world has gone upside down.