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Originally Posted by oldjudge
Nice to see the rally today but the important thing to remember is that this is far from over and no one has any idea what the ultimate outcome will be. I saw that Vietnam offered to eliminate all tariffs on US goods and the administration said that this is not enough. I don't know if the government wants a deal and, if so, what it would believe a fair deal is. I think that some of the goals of the tariffs will be achieved--some jobs will eventually return to the US, but I don't know how to compare adding a few million jobs say to having higher costs for several hundred million people.
China is the second largest holder of US treasuries (Japan first, UK third). Piss off China enough and this could escalate to a financial war and if China stops buying our obligations rates will rise and the cost of financing our 1.1 trillion dollar deficit will grow.
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At the same time, it's not like China can just do whatever it wants.
All those dollars they make selling us stuff have to go somewhere. Either they can buy treasuries, or they can buy other stuff with those dollars. Or I guess they could convert those dollars back into 人民幣 (aka 元 or yuan).
Except that if they trade all those dollars for their own currency, then our currency would weaken, and theirs would strengthen, which makes their goods that much more expensive in dollar terms.