President Trump imposed tariff sanctions on China, and Chinese authorities retaliated by imposing higher tariffs on imported US products, blacklisting US companies, and restricting US access to Rare Earth Elements, which are essential materials for manufacturing high-tech products.
Trump recently seemed to show goodwill, indicating a willingness to engage in friendly dialogue with China, but China was prepared to strike back against Trump's earlier aggressive stance, ready to reciprocate his sanctions.
CNBC interviewed several officials and experts who outlined potential tariff sanctions and further retaliation against the US. CNBC interviewed Brad Setser from the Council on Foreign Relations, who emphasized that China is the second-largest product supplier to the US and its export significance should not be underestimated. Before April, the average US tariffs on China were 20%, and by late April, some goods had risen to 124%, leaving many traders unable to develop strategies.
Trump was prepared to dialogue with Chinese leader Xi Jinping, claiming he would take a friendly approach, but the trade war fire had already been ignited. China was ready to counterattack, with experts suggesting China would reclaim negotiation control from Trump, explaining the cards China holds.
Table of Contents
ToggleFirst Card: US Bonds
The US borrows money by issuing bonds, with US national debt exceeding 36 trillion dollars. According to the U.S. Treasury Department's February 2025 data by country and region, the top foreign holders of US national debt are Japan (1.126 trillion dollars), followed by mainland China (784.3 billion dollars), the United Kingdom (750.3 billion dollars), and Taiwan ranking tenth (294.8 billion dollars).
Holding US bonds gives China a certain influence over the US financial market. Brad Setser noted that China's US bonds represent 4% of US GDP, and he believes that if US national debt is massively sold off, and the Federal Reserve does nothing, those seeking housing loan financing would be significantly impacted.
On April 11th, national debt yields increased, with 10-year rates at 4.48% and 30-year rates at 4.85%. China could disrupt the US financial market by massively selling its bonds.
Daniel Drezner, a professor of international politics at Tufts University, said that if both Japan and China sell their bonds, it could trigger financial market panic. Japan, which recently conducted trade negotiations with the US and holds the most US bonds, with Finance Minister Kato Katsunobu stating that bonds are a chip in Japan's hand.
Second Card: Restricting Rare Earth Exports
China possesses rare earth elements essential for high-tech industries. These rare earths are crucial materials for defense and technology, and China has begun restricting exports to the US.
Third Card: Refusing to Buy US Oil and Natural Gas
China, the third-largest US exporter, stated it will no longer purchase US oil and natural gas, instead using its own Chinese crude oil.
China possesses three powerful cards: holding large amounts of US national debt, restricting rare earth exports, and refusing to buy US oil and natural gas, which can significantly impact US trade and financial markets, providing China substantial negotiation leverage in the US-China trade war. Despite Trump's claims of a friendlier approach, experts believe China may reclaim negotiation initiative and is prepared for a stronger counterattack.
Risk Warning
Cryptocurrency investments carry high risks, with prices potentially fluctuating dramatically. You may lose all your principal. Please carefully assess the risks.
