Washington is exploring new ways to target Beijing as it runs out of goods to tax in the ongoing trade war, and century-old Chinese bonds could become a weapon, analysts have told RT.
On Sunday, the latest tit-for-tat tariffs came into force. The US slapped a wide range of Chinese goods with 15 percent tariffs, while Beijing responded with levies ranging from 5 to 10 percent on American imports, including agricultural products. Despite the tariffs going into effect, the sides are still planning to hold trade talks later this month.
If the two sides still fail to hammer out their differences, the second batch of levies is scheduled to go into effect starting December 15, and separate US tariff hikes come into force in October.
President Donald Trump’s next move in an increasingly fraught trade war with China could be one for the history books, literally. The Trump administration has been studying the unlikely prospect of reviving century-old claims on Chinese bonds sold before the founding of the communist People’s Republic.
The defaulted China bonds can be found in the attics and basements of thousands of Americans, or on EBay, where the certificates sell as collectibles for as little as a few hundred dollars each. The PRC, which succeeded the Republic of China after it replaced the imperial dynasty, has never recognized the debt, though that hasn’t stopped decades of attempts to collect payment on it.
While it’s really doubtful that China would ever pay out, the US’ attempt to claim the money would only trigger serious economic problems and make the already turbulent situation worse.
“If America gets a ruling that they [China] must pay then what America would do is freeze Chinese assets in America… take those assets or seize those assets. And then you have a very serious trade war going on,” Shayne Heffernan said, adding that China would certainly retaliate to such a move.
The individual holders of the antique bonds can do little to get any money from China, which has never recognized the debt. Firstly, they would have to have their claim recognized, win the case, and then find some way to force China to cash out, according to Duke University professor Mitu Gulati.
However, it would be a completely different story if the Trump administration steps in. While the US government used to support China, when holders of the imperial bonds sued it (Jackson v People’s Republic of China), and the case was dismissed, the current White House administration may not be so supportive, according to the analyst.