China might have just tested its 'nuclear option' in the trade war

• China may have run a small-scale test of the "nuclear option" in its trade war with the US by selling $20 billion worth of US government debt.
• If China sold its $1.2 trillion in US Treasurys, it could raise America's borrowing costs, weaken the US dollar, and plunge global markets into chaos.
• A fire sale, however, would strengthen the yuan, making Chinese exports less attractive, and could spin the currency out of control.

China may have run a small-scale test of the "nuclear option" in its trade war with the US. The Asian nation sold $20 billion worth of US Treasurys in March, possibly foreshadowing a total offloading of American government bonds that would plunge global markets into chaos. China is the biggest foreign holder of US government debt, with more than $1.2 trillion in Treasurys, or about 7% of the entire market. The latest sale represents its largest disposal in over two years, according to the Financial Times. While the world's second-largest economy occasionally sells US Treasurys to replenish its reserves or support its currency, the yuan, those don't appear to be the reasons for the latest dumping...MORE