The world’s second-largest economy has been steadily selling billions of dollars of U.S. Treasury securities.
New data from the U.S. Treasury Department show China reduced its holdings of U.S. Treasuries from $816.3 billion in December to $767.4 billion in March.
This represents a quarterly decline of $48.9 billion.
“The yuan is likely to be the biggest driver of inflation,” said Steven Chiu, chief Asia foreign exchange and rates strategist at Bloomberg Intelligence. To tell There is a clear trend afoot.
“China has been selling both dollars and yuan despite the Fed’s rate-cutting cycle looming, suggesting a clear intent to diversify away from its US dollar holdings.”
The decline in China’s holdings of U.S. Treasuries is the result of a study conducted by Desmond Luckman, a former vice president of the International Monetary Fund (IMF), who said: Warning A new trade war is brewing between the two world economic powers.
In a post for the American Enterprise Institute, a Washington-based think tank, Lachman said both President Biden and former President Trump have encouraged “punitive import tariffs” against China.
“Biden announced a 100% import tariff on Chinese-made electric vehicles, as well as a tripling of import tariffs on Chinese-made steel and aluminum and a doubling of import tariffs on Chinese-made semiconductors and solar cells.
Not to be outdone, former President Donald Trump has signaled that if re-elected, he would raise tariffs on Chinese-made electric vehicles to 200% and impose a 10% tariff on all U.S. imports.”
Raising import tariffs would likely prompt China to retaliate, leading to an escalation that would hurt both countries, Lachman said. If a full-scale trade war were to materialize, he warned, it would create inflationary pressures in the U.S. as Chinese companies raise prices to make up for the added costs of entering the U.S. market.
“The Fed is already finding that inflation is unexpectedly resistant to interest rate hikes. A new trade war would only further delay the start of the Fed’s rate cutting cycle, denying the country an opportunity to boost growth.”
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