As of 2024, China has reduced its holdings by approximately 30% over a four-year period. China was able to use the exchange rate to buy yuan when the currency depreciated. China seemed to be assisting Trump years ago in lowering the dollar to ease trade frictions. That is no longer the case here as the United States began engaging in economic warfare when it pushed Russia off SWIFT, implemented sanctions, and confiscated private assets. Politicians have threatened China with economic warfare over Taiwan, and there is no incentive to hold the debt of your political enemy. It is akin to holding a gun to someone and asking them to lend you money with the promise to pay it back.
China’s steady retreat from U.S. Treasury bonds is more than a financial adjustment—it’s a geopolitical statement. Once the largest foreign holder of U.S. government debt, Beijing has reduced its holdings from $1.3 trillion in 2013 to about $756 billion by mid-2025, its lowest level in 15 years. China Holdings of US Treasury Securities data was reported at 784.300 USD bn in Feb 2025. This records an increase from the previous number of 760.802 USD bn for Jan 2025. China Holdings of US Treasury Securities data is updated monthly, averaging 937.400 USD bn from Mar 2000 (Median) to Feb 2025, with 300 observations. The data reached an all-time high of 1,316.700 USD bn in Nov 2013 and a record low of 58.900 USD bn in Nov 2000. China Holdings of US Treasury Securities data remains active status in CEIC and is reported by U.S. Department of the Treasury.
This deliberate unwinding is driven by multiple causes:
- Risk of Sanctions: After Washington froze Russia’s reserves in 2022, Beijing accelerated efforts to reduce exposure to dollar assets vulnerable to similar political risk.
- Diversification: China has been aggressively reallocating reserves into gold, commodities, and non-U.S. assets, building financial buffers that align with its self-reliance strategy.
- Currency Sovereignty: By relying less on Treasuries, China strengthens the role of the renminbi in trade and finance, furthering its long-term goal of reshaping the global monetary order.
The effects are already visible. U.S. borrowing costs face gradual upward pressure as one of the largest creditors steps back. Meanwhile, China’s accumulation of gold reserves has reached record highs, signaling a hedge against both inflation and geopolitical shocks.
Key information about China Gold Reserves
- China Gold Reserves was reported at 208.643 USD bn in Feb 2025
- This records an increase from the previous number of 206.534 USD bn for Jan 2025
- China Gold Reserves data is updated monthly, averaging 3.093 USD bn from Dec 1977 to Feb 2025, with 544 observations
- The data reached an all-time high of 208.643 USD bn in Feb 2025 and a record low of 425.000 USD mn in Feb 1985
- China Gold Reserves data remains active status in CEIC and is reported by CEIC Data
- The data is categorized under World Trend Plus’s Global Economic Monitor – Table: Gold Reserves: USD: Monthly
A Trump-Era Twist
One underexplored consequence traces back to Donald Trump’s tariff wars (2018–2019). As tariffs throttled trade flows between the two giants, Beijing recognized the dangers of economic overdependence on Washington. That episode planted the seeds of today’s Treasury retreat. Should Trump—or another protectionist administration—reimpose tariffs in the future, Beijing’s reduced U.S. debt exposure gives it more freedom to retaliate, whether through counter-tariffs, yuan devaluation, or even accelerating its “de-dollarization” push.
Possible Consequences
- For the U.S.: Higher long-term interest rates, rising debt service costs, and greater sensitivity to foreign policy shifts.
- For China: Reduced liquidity but increased resilience to U.S. financial pressure.
- For the World: A slow-moving shift toward a fragmented reserve system where gold, the euro, and the renminbi share roles with the dollar.
This “tug of war” over Treasuries is not about immediate collapse but about gradual decoupling—a financial mirror to the strategic rivalry shaping the 21st century.
🔄 Cause → Effect → Consequence
Cause:
- China steadily sells U.S. Treasuries (from $1.3T in 2013 to $756B in 2025).
- Motivations: reduce dollar exposure, diversify into gold/yuan assets, guard against sanctions.
Effect:
- U.S. borrowing costs risk inching up as one of the biggest buyers exits.
- Washington becomes more sensitive to foreign financing conditions.
- U.S.–China financial interdependence weakens.
Consequence (Trump Tariff Twist):
- With Trump’s potential return to tariffs on Chinese goods (echoing 2018–2019 policies), Beijing could double down on financial retaliation by accelerating Treasury sell-offs.
- This weaponization of finance may lead to a feedback loop: tariffs raise U.S. inflation → higher Fed rates → more Treasury issuance → less Chinese buying → even higher yields.
- Global investors interpret this as a shift toward a fragmented world order, where trade wars are matched with financial wars.
The dumping of US Treasury securities by China amidst the ongoing trade tensions with the US from 2018 to 2025 has had pronounced consequences not only in financial markets but also notably in commodities and gold prices, creating a complex web of international market disruptions.
Timeline and Key Data Points
- 2018: As the Trump administration imposed tariffs on Chinese goods beginning mid-2018, China retaliated with tariffs on key US agricultural exports such as soybeans, pork, and corn. This led to a significant drop in US soybean exports to China by over 70% in volume, causing plummeting crop prices and unsold stockpiles in the US Midwest. The US government responded to farm losses with $28 billion in aid during 2018-2019. China’s retaliation also involved increased pressure on US Treasury holdings, contributing to periods of market turbulence.
- 2019-2020: The escalation of tariffs pushed China to diversify its commodity sourcing, significantly increasing agricultural imports from Brazil and Argentina. China’s gradual sell-off or slowdown in accumulating US Treasuries coincided with spiking US Treasury yields, which increased borrowing costs domestically in the US and added volatility to bond markets.
- 2020 Phase One Trade Deal: Early 2020 saw a partial de-escalation with the Phase One trade deal, leading to a rebound of US agricultural exports to China, reaching a record $40.9 billion in 2022. This included rising imports of soybeans (30.4 million tonnes in 2022) and other commodities critical to China’s livestock and industrial sectors.
- 2025 Escalations: Renewed tariff conflicts resurfaced in early 2025, with China suspending imports from certain US agricultural producers and signaling the potential re-imposition of steep tariffs. Prices in US farm commodities began to fall again due to anticipated export declines. China considered further dumping US Treasuries as retaliation, which heightened volatility in financial markets and contributed to rising US Treasury yields.
Impact on Commodities and Gold
- Agricultural Commodities: Tariff wars severely impacted US agricultural exports, especially soybeans, pork, corn, and cotton. The disruption caused oversupply in the US and sharply fluctuating commodity prices internationally. With Chinese tariffs pushing China towards alternative suppliers, global commodity flows shifted, raising prices for some commodities and depressing others due to reduced demand from the US.
- Industrial Metals and Rare Earths: China’s role as a major supplier of critical minerals, such as copper and rare earth metals, intersected with the trade war. The US imposed tariffs on some of these materials, and China threatened to curtail exports, which would disrupt US manufacturing and defense supply chains.
- Gold and Safe-Haven Assets: The uncertainty and market volatility caused by the dumping of US Treasuries and tariff spirals led investors to seek safe-haven assets like gold. Gold prices tend to rise during periods of market stress and geopolitical uncertainty. Throughout periods of escalation (notably 2018-2019 and 2025), gold prices showed notable upwards spikes as investors hedged against currency devaluation and stock market volatility caused by dumping actions and tariff announcements.
Broader Market Consequences
- The dumping of US Treasury securities increased the yields on US government debt, pushing borrowing costs higher for the US government and corporations, slowing economic growth prospects.
- The volatility in financial markets fueled by tariff announcements and Treasury sell-offs increased risk premiums globally, disrupting global capital flows toward safer assets, including gold.
- Commodity markets experienced realignment as sourcing changed due to tariffs and retaliatory restrictions, impacting global supply chains and prices.
- The cyclical tit-for-tat nature of tariffs and Treasury dumping deepened uncertainty in international trade, reducing market confidence and exacerbating price swings in commodities and precious metals.
In conclusion, the dumping of US Treasury securities by China as part of broader trade conflict dynamics has had multi-dimensional effects on international markets. These range from amplified volatility and rising borrowing costs in financial markets to significant supply chain disruptions and price fluctuations in key commodities and gold. The broader geopolitical contest between the US and China continues to create a cycle of uncertainty influencing global economic stability and market conditions through 2025.
