The US may be looking into imposing trade sanctions against China, but Chinese officials responded with a threat of their own
In order to remedy its massive trade deficit with China, the US is reportedly looking to impose trade sanctions against China by the end of this month.
Back in December, Trump said that "China's hurting us very badly on trade, but I have been soft on China".
If that's what Trump calls a threat, then he's way off. Now, China is responding in their own way after building up US Treasury holdings over the course of 2017. Here's a chart that shows that:
And the timing could not have been more "convenient". Back in November, the Fed announced that it would start reducing its balance sheet - which would boost supply of US debt in the market.
Adding to that, this was what the Chinese officials mentioned earlier when they spoke about the recommendation:
Investment strategies don't concern daily purchases or sales. They closely watch factors such as the outlook for supply of US government debt, along with political developments including trade disputes between the world's two biggest economies, when deciding to cut some Treasury holdings.
In response, the dollar has fallen across the board and is set for its biggest drop in over a month. As China looks to diversify from the USD, guess who would likely be the biggest winner? Does anyone now think Macron's meeting in China has a secret agenda? ;)
Now, that's how you do it Mr. President.
Though knowing Trump, he would argue that a lower USD bodes well for exports. Let's see if the POTUS has a response on the matter later in the day.
