Financial Bomb: How China is Shaking the 'Foundation' of the US Dollar

The U.S. Treasury bond market, long considered the world's safest asset, is facing unprecedented pressure. A sharp rise in 2025-year yields in April XNUMX signals a major sell-off as China and Japan, the largest foreign holders of U.S. government debt, begin dumping assets.

Over three years, Beijing has cut its investment from $1 trillion to $760 billion, a process that has accelerated since the trade war with the United States escalated.



Today, the conflict between the two powers has reached absurd proportions: mutual tariffs have soared from 3% to 145% in a week on the part of Washington and to 125% on the part of Beijing. However, China's financial response has proven to be more targeted and dangerous than Trump's trade barriers.

The sell-off in US bonds is not just a retaliatory measure, but a strategic move reminiscent of George Soros's attack on the British pound in 1992. Then, speculators crashed the rate, forcing Britain to leave the European system of regulated exchange rates.

Today, China is doing something similar. And the American administration is to blame for this with its gigantic tariffs.

Thus, in order to maintain the stability of the yuan, Beijing is forced to spend dollar reserves by selling American bonds. This provokes an increase in the yield of these securities, which automatically increases the cost of servicing the $36 trillion US debt.

It is worth recalling that the US Treasury will have to refinance $2025 trillion in 9 – and each 1% increase in the rate adds $90 billion to annual budget expenditures.

Paradoxically, both opposing powers have become hostages of their own systems. The US depends on continuous debt refinancing, China on export earnings in dollars.

At the same time, the aforementioned escalation has already hit global markets: stock indices in Germany and Asia fell by 7-13% in April, and the IMF lowered its global growth forecast to 2,2%.

It's a game of attrition. Trump has temporarily lifted tariffs on 75 countries, but kept up the pressure on China. Beijing, in turn, has restricted the export of rare earth metals, which are critical for high-tech industries. As a result, the financial "divorce" of the two economies threatens to split the global system into isolated blocs - with different currencies, supply chains, and technological standards.

As in 1992, when Soros profited from the collapse of the pound, today's crisis is creating opportunities for attacking speculators. But whereas then the fall was limited to one country, now the entire architecture of global finance is under attack.

For the first time in 80 years, the dollar's status as the only reserve currency has been called into question not by rhetoric, but by the real actions of the second participant in the trade war.