China is currently the largest holder of U.S. government debt. It now owns $1.12 trillion in U.S. Treasury bonds.
If China decided to sell off its U.S. government debt holdings as a form of retaliation in the ongoing trade war with the U.S. and President Donald Trump, it could upend global financial markets and drive U.S. interest rates higher.
That’s a measure some have started calling China’s “nuclear option.”
China, however, has several reasons why it might not weaponize its bond holdings anytime soon.
Watch the video above to learn about China’s so-called nuclear option in the ongoing trade war.