I think Treasuries will be just fine.
China can’t sell them. They are just as trapped holding them as we are. If they sell their yuan will increase in value so high it would make their exports way too expensive for the globe to buy. We’d become the manufacturing leader in the world after the dollar tumbled.
This is not an argument, this is a shrug. The Treasury market is not “just fine” when yeilds are spiking (meaning prices are falling), liquidity is thinning (major concern for the largest bond market in the world) and buyers, including the FED, are stepping back. You can’t hand-wave away stress in a $27 trillion market with “I think it’ll be fine.” Show your math or don’t play, Mr. I don’t believe in gravity.
Yes, if they sold a ton of Treasuries and converted the proceeds into yuan, it could push up the value of the yuan. But China has currency controls and a state-managed economy. They don’t let the yuan float freely, and they have tools to manage the impact of capital flows. China doesn’t need to sell Treasuries to hurt the U.S. economically. They can just stop buying. Saying “they can’t sell” assumes they are completely cornered. They aren’t. They’re being careful and calculated, something Trump simply can’t do.
That’s fantasy economics. A weaker dollar could help exports, but it increases the import prices (inflation goes up), increases the cost of foreign aid, could lead to capital flight, and makes borrowing for government expenditures more expensive. Manufacturing doesn’t just snap back. It requires infrastructure, skilled labor, supply chains and decades of industrial policy. If the dollar tumbles, the whole US economy takes a hit before any potential long-term manufacturing benefit shows up. That’s not a strategy, that’s economic trauma.