China Move Could Send US Mortgages Climbing

 China Move Could Send US Mortgages Climbing

The deepening of President Donald Trump's trade war with China could push the country—the second-largest holder of U.S. debt—to dump its Treasury holdings, sending mortgage rates skyrocketing for millions of Americans.

While some experts believe that such an escalation is unlikely to happen, China's President Xi Jinping has promised to "fight" the Trump administration's escalation of tariffs "to the end"—and there is a chance he might do so through a very dangerous weapon the country has in its arsenal: more than $760 billion in holdings in U.S. Treasury securities.

Why It Matters

While backing away from other levies on individual countries beyond the 10 percent baseline tariff on all imports to the United States announced earlier this month, Trump has imposed 145 percent tariffs on Chinese goods. China has retaliated with its own 125 percent tariffs on imported American goods.

As tensions grow between the two nations over a budding trade war that has no apparent easy way out, some experts have raised concerns that Beijing may be better equipped to withstand the negative economic shocks caused by the tariffs—and may even be willing to use its Treasury holdings to strike back at Washington and weaken its opponent.

China Move Could Send US Mortgages Climbing Photo-illustration by Newsweek/Getty
What To Know
Just weeks ago, the 10-year yield rose by 50 basis points to 4.49 percent, the biggest weekly jump since 2001. This happens when someone sells bonds—lots of them, in this case.

While it is not known precisely where the spike in activity came from, its timing suggests that Beijing may have been behind it.

China is the U.S.' second-largest foreign creditor after Japan. About a decade ago, China used to hold even more U.S. debt, at over $1.3 trillion. As of early 2025, it is estimated to have about $760 billion. Considering the ongoing trade war with the U.S., it is hard to predict what it could now do with them.

"China seems willing to sell U.S. treasuries, even if it means absorbing capital losses," Olivier Blanchard, the Robert M. Solow Professor of Economics emeritus at MIT, wrote in a post on X (formerly Twitter) on April 10.

"And it looks like it does not take a lot to increase the 10-year rate by quite a bit. Given this, doubling down on U.S. tariffs on Chinese imports does not feel like a winning strategy," he added.

"Given its political regime, in a game of chicken, the Chinese autocracy can absorb bad news for longer than can the Trump administration," Blanchard said.