How China’s Moves Could Shake the U.S. Economy

We’re in the middle of a global economic chess match—and one of the biggest players on the board is China. While many people are watching inflation or interest rates here at home, some of the biggest shifts may be happening quietly behind the scenes in international markets.

Let’s walk through how China’s recent actions, U.S. Treasury trends, and central bank policies could affect your money—and what you can do to protect and grow your wealth in uncertain times.

China’s Economic Pushback Against the U.S.

Over the past several months, China has been dumping U.S. dollars and cutting back on its purchases of U.S. debt. That’s a big deal, especially because China is the second-largest holder of U.S. debt (right behind Japan).

Why now? It’s largely seen as a strategic response to U.S. tariffs that have been hurting China’s manufacturing sector. By selling off U.S. Treasuries, China could be aiming to put pressure on the U.S. dollar and make its own economy less dependent on American financial leverage.

This move by the People’s Bank of China is already creating ripples. U.S. Treasury yields are rising at the fastest rate since 2001—suggesting that there’s less demand for U.S. debt, and it may be getting more expensive for the government to borrow money.

What Rising Treasury Yields Mean for You

When Treasury yields go up, it affects more than just Wall Street. These yields directly influence the interest rates you pay on:

• Mortgages
• Credit cards
• Car loans
• Business financing

Higher borrowing costs slow down economic growth by making it harder for both consumers and businesses to spend. If you’re looking to buy a home, finance a car, or run a business—this matters.

The cause? With big international players like China pulling back from U.S. debt, demand drops, yields rise, and everyone pays more to borrow.

The Fed’s Forecast: Slower Growth, Higher Inflation

The Federal Reserve is keeping a close eye on these developments. Right now, they’re projecting a 44% chance that unemployment in the U.S. will increase within the next 12 months. That’s the highest projection since the height of the pandemic.

Inflation isn’t out of the woods either. While the Fed had hoped to keep it around 2.4%, some forecasts now expect it to rise closer to 3.6%, and possibly even 5% by 2025, according to Fed official Christopher Waller.

If economic conditions worsen, the Fed may step in with interest rate cuts or another round of quantitative easing. While those tools help stimulate the economy, they can also lead to more inflation down the road.

China’s Gold Strategy: A Hedge Against the Dollar

As China sells off dollars, it’s also buying gold—lots of it. For five months straight, the People’s Bank of China has increased its gold reserves. This signals a broader strategy to back its currency and economy with hard assets.

It’s not just China doing this. Other nations are also increasing their gold holdings, which suggests a global hedge against instability, fiat currency devaluation, or geopolitical risk.

For U.S. investors, that’s a cue to consider hard assets—gold, real estate, or commodities—as part of a diversified long-term strategy.

The Bigger Picture: U.S.-China Trade and Technology War

Tariffs, tech bans, and economic maneuvering are part of an ongoing tug-of-war between the two largest economies in the world.

Chinese manufacturers are now targeting American consumers directly, selling goods on platforms like TikTok at deep discounts, often bypassing U.S. retailers and e-commerce giants. While it might be great for bargain hunters, it’s putting more pressure on U.S. businesses and potentially weakening domestic job markets.

Treasury’s Take: Who Really Has the Power?

The U.S. Treasury Secretary recently pointed out that while China owns a large portion of U.S. debt, it’s still the lender—and the U.S. is the borrower. If the U.S. were to default (unlikely, but not impossible), it’s China that would take a financial hit.

This underscores a complicated relationship where both nations are economically intertwined—but also using that interdependence to gain leverage.

So, What Should You Do as an Investor?

It’s easy to feel overwhelmed by headlines about inflation, rising rates, and international tension. But the key is to stay grounded in a long-term investment approach.

Here are some key strategies to consider:

• Passive investing: Broad market index funds like the S&P 500 or total stock market funds offer diversification and long-term growth, even during market dips.
• Active investing: For those willing to do the research, niche opportunities in commodities, defense, or emerging markets may offer higher returns.
• Stay consistent: Don’t let fear dictate your decisions. Emotional trading often leads to poor timing. Stick to your plan.
• Manage risk: Review your portfolio’s exposure to interest rate changes or currency risks, and consider adjusting your asset mix as needed.
• Hold cash reserves: Having cash on hand gives you flexibility when opportunities arise—or when unexpected expenses hit.

Final Thoughts

Whether it’s China selling off debt, the Fed preparing for a bumpy 2025, or inflation ticking up again, one thing is certain—uncertainty isn’t going away. But with the right strategy and a clear understanding of what’s happening in the global economy, you can stay ahead of the curve.

If you’re looking for smart, actionable investment education, keep tuning into Medicare School and our financial series on ROI TV. We’ll keep breaking it down so you can make decisions that protect and grow your wealth—no matter what the headlines say.

Jaspreet Singh is not a licensed financial advisor. He is a licensed attorney, but he is not providing you with legal advice in this article. This article, the topics discussed, and ideas presented are Jaspreet’s opinions and presented for entertainment purposes only. The information presented should not be construed as financial or legal advice. Always do your own due diligence