Opinion | Are Trump’s Asian bankers about to call in their loans?

As Donald Trump throws grenades at the global trading system, investors are caught in the crossfire of tit-for-tat retaliatory steps. China is hitting back. So are Canada, the European Union and even India. But recent moves by Russia may be most ominous of all.

Granted, Moscow is not officially linking its decision to halve its holdings of US treasuries – from US$109 billion in May 2017 to about US$48 billion now – with US tariffs. The selling accelerated in recent months, and the timing is no coincidence. It came as President Trump’s team telegraphed a weaker dollar. It came, too, amid chatter that Beijing, America’s biggest banker, might soon dump Treasuries to strike back.

There are myriad reasons why a politically driven fire sale might backfire. A surge in yields would hurt US consumers, choking a key source of demand for mainland goods. Chaos in markets could throw China’s credit and debt-addicted financial system off balance at the worst possible moment.

As such, President Xi Jinping’s government is slapping taxes on some US$50 billion of US goods, a response to Trump’s hundreds of billions of dollars’ worth of threatened duties. This is a tricky moment for China. Xi doesn’t want to kill his own supply chains.

What can Beijing do? It could surely block US investment banks access to state-owned enterprise deals, or suspend all Chinese group tours to Trump’s America. It could hit back with exit taxes on goods Apple and Walmart make in China, cancel all Boeing aircraft orders and slap bigger tariffs on Detroit’s cars, Iowa’s agriculture products, Arkansas’s beef or all pharmaceuticals. Then again, doing so might just provoke Trump to toss even bigger grenades at world commerce.