China Allegedly Dumps U.S. Treasuries Ahead of Trump’s 104% Tariff

Speculation is rising among investors that China is offloading U.S. Treasuries in response to escalating trade tensions, just hours before a new 104% tariff from President Donald Trump takes effect.

Venture capitalist and Trump ally Chamath Palihapitiya shared Tuesday on X that sources suggest China is selling U.S. Treasuries to push yields higher, potentially complicating upcoming Treasury auctions. “I’m hearing they are dumping UST to try and move rates… May make sense to delay auctions to next week. China can’t sell indefinitely,” he wrote.

U.S. bond markets reacted swiftly. The 5-year Treasury yield climbed 2% to 3.918%, the 10-year jumped 3.2% to 4.291%, and the 30-year surged 3.6% to 4.762%. Higher yields make U.S. borrowing more expensive, a concern for an economy facing trillions in refinancing in 2025.

China, the second-largest holder of U.S. debt at $761 billion as of January, may be using Treasury sales as leverage in its deepening economic standoff with Washington. Japan remains the top holder at $1.08 trillion.

Meanwhile, the equity markets turned volatile. The S&P 500, up 4% earlier, reversed course to close down 79 points, or 1.57%, as bond market jitters shook investor confidence.

The Trump administration has highlighted low yields as a strategic advantage amid market turmoil—potentially aiming to refinance debt at lower rates and stimulate the economy through reduced borrowing costs on mortgages and car loans. However, rising yields threaten that narrative.

While unconfirmed, Palihapitiya’s ties to Trump’s circle lend weight to the rumors. With China vowing to “fight to the end” over tariffs, Treasury sales may be just one tool in its escalating retaliation strategy.