Think about it, the U.S. depends on China to provide funding for its budget deficits. It is the largest foreign holder of U.S. Treasury securities – some $1.3 trillion in direct ownership and at least another $250 billion of quasi-government paper. A lack of Chinese buying could turn the next Treasury auction into a rout.
America depends on China because of a fundamental weakness in the structure of the U.S. economy — a profound and worrisome lack of domestic saving. In the fourth quarter of 2017, the net domestic saving rate (depreciation-adjusted saving of households, businesses and the government sector, combined) was just 1.3% of national income.
Lacking in savings at home, and wanting to consume and grow, the U.S. must import surplus foreign saving from abroad – and run massive balance-of-payments and trade deficits to import this capital. In 2017, the United States had merchandise trade deficits with 102 nations!