U.S. Treasury Secretary Dismisses Concerns Over China Weaponizing Treasuries

(Reuters) – U.S. Treasury Secretary Scott Bessent, in an interview with Yahoo Finance on Tuesday, dismissed concerns regarding China potentially weaponizing its Treasuries despite the current bond market volatility. He emphasized that there is no risk of China using its substantial Treasury holdings to inflict economic pain on the United States.

Bessent stated, “If Treasuries hit a certain level or if the Federal Reserve believed that a foreign — I won’t call them an adversary — but a foreign rival were weaponizing the U.S. government bond market or attempting to destabilize it for political gain, I am sure that we would do something in conjunction with each other, but we just haven’t seen that. We have a big tool kit.”

As of January, China is the second-largest foreign holder of U.S. government debt, following Japan, with nearly $761 billion in bonds.

Bessent further explained, “If they (China) sell Treasuries, then they would have to buy RMBs, and it would strengthen their currency. And they’ve been doing just the opposite,” indicating that it is not in China’s economic interests to sell these assets.

This year, U.S. President Donald Trump has imposed tariffs of 145% on Chinese goods and has instituted broader reciprocal duties affecting all U.S. trading partners. This action led to ridicule and criticism from Beijing, prompting them to raise taxes on U.S. goods to 125%. Bessent noted that Beijing has referred to Trump’s tariff strategy as “a joke,” which displeased him.

“These are not a joke. I mean these are big numbers,” Bessent stated in a previous Bloomberg Television interview.

He concluded that any negotiations between the U.S. and China would need to originate from “the top,” involving President Trump and Chinese President Xi Jinping.