[Column] Is China about to cross the Rubicon?

“Be cool! Everything is going to work out well,” US President Donald Trump posted on his True Social account on April 9 at 9:37 am (local time), a little over nine hours after the absurd reciprocal tariffs on 57 countries — 25% on goods from Korea — went into effect.
 
Four minutes later, as if to demonstrate his full faith in the decision, Trump posted, “This is a great time to buy [US stocks and bonds]!”
 
A mere four hours later, however, Trump had no choice but to eat humble pie. After a meeting with US Secretary of the Treasury Scott Bessent and US Secretary of Commerce Howard Lutnick at the Oval Office, Trump announced at 2:18 pm that while the blanket tariff of 10% would be remain in place, he had authorized “a 90-day pause” for reciprocal tariffs for countries excluding China. “[People] were getting yippy, you know, they were getting a little bit yippy, a little bit afraid,” Trump told reporters when explaining that decision.
 
Americans are getting “a little yippy” and “afraid” as Trump’s reciprocal tariffs have triggered the nose-diving prices of US Treasury bonds, which have long been considered safe havens for investors worldwide.
 
The interest rate for 10-year US Treasury bonds, which had been at 3.9 percent a week before, spiked sharply to 4.5 percent. The hike in the yield for US government borrowing would cause the government’s interest burden and valuation losses on US Treasury bonds to skyrocket, leading former US Secretary of the Treasury Lawrence Summers to warn that “it’s more likely than not that [the US is] going to have a recession.” Trump has been knocked off his high horse, and the US is exposing its Achilles’ heel for the entire world to see.
 
Now it’s time to wait and watch what China does in the face of this tariff war with the US, a war that neither of the parties can back out of. China currently has US$760.8 billion holdings in US Treasury securities. Combined with the holdings of Hong Kong, the number surges to US$1.0167 trillion, making China the US’ second-largest foreign creditor after Japan (US$1.0793 trillion).
 
Former Japanese Prime Minister Ryutaro Hashimoto, who engaged in fierce negotiations with the US over vehicle tariffs in 1995, reminisced on the cutthroat mediations during a speech at Columbia University two years later, commenting, “On several occasions we’ve had this feeling to try and sell off US Treasury bills and bonds.”
 
It is entirely possible that Chinese President Xi Jinping is preoccupied with the same thoughts that plagued Hashimoto 30 years ago. While Japan could not bear to make that decision to the US, its ally, China may reach a different conclusion.
 
If China pushes forward with steely resolve, the US will interpret such actions as China’s version of an attack on Pearl Harbor. In that context, the divestment of US Treasury bonds constitutes a strategic red line for the US and, to China, an action that should not be considered without a clear readiness for conflict, tantamount to the crossing of the Rubicon.

By Gil Yun-hyung, editorial writer

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