Washington is exploring new
ways to target Beijing as it runs out of goods to tax in the ongoing trade war,
and century-old Chinese bonds could become a weapon, analysts have told RT.
On Sunday, the
latest tit-for-tat tariffs came into force. The US slapped a wide range of
Chinese goods with 15 percent tariffs, while Beijing responded with levies
ranging from 5 to 10 percent on American imports, including agricultural
products. Despite the tariffs going into effect, the sides are still planning
to hold trade talks later this month.
If the two sides
still fail to hammer out their differences, the second batch of levies is
scheduled to go into effect starting December 15, and separate US tariff hikes
come into force in October.
But the
trade war adversaries are already considering options beyond tariffs. Beijing,
which enjoys a trade surplus with the US, has hinted it could use rare earth metals as a leverage. There
is also China’s “nuclear” option of dumping US Treasuries.
Meanwhile,
Washington has been reminded of China’s century-old bonds incurred before the
nation adopted communism, which, adjusted for inflation, interest and other fees,
amount to around $1 trillion, perfectly covering Beijing’s holdings of US
Treasury Bills.
“The
US will simply default on $1 trillion of UST bonds held by China and claim,
based on these old bonds, that they are justified in doing so,” Max Keiser, the host
of RT’s Keiser Report, said.
While
it’s really doubtful that China would ever pay out, the US’ attempt to claim
the money would only trigger serious economic problems and make the already
turbulent situation worse, investment guru Jim Rogers told RT.
“If
America gets a ruling that they [China] must pay then what America would do is
freeze Chinese assets in America… take those assets or seize those assets. And
then you have a very serious trade war going on,” Rogers said, adding that China would certainly retaliate to
such a move.
The individual
holders of the antique bonds can do little to get any money from China, which
has never recognized the debt. Firstly, they would have to have their claim
recognized, win the case, and then find some way to force China to cash out,
according to Duke University professor Mitu Gulati.
However, it
would be a completely different story if the Trump administration steps in.
While the US government used to support China, when holders of the imperial
bonds sued it (Jackson v People’s Republic of China), and the case was
dismissed, the current White House administration may not be so supportive,
according to the analyst.
“Trump
might not act in the same way if a case were brought today, especially if the
bondholders were his ardent supporters,”
Gulati noted. “Now, if the US federal government were trying to help the
creditors sue, that would be a different story. But I don’t think that even the
Trump administration is that crazy.”
Source: RT