Why US has to borrow money from China and issue Treasury bonds?

🔹 Why the U.S. Borrows Money (in general)

The U.S. spends more than it earns through taxes. This gap is called the budget deficit. To cover this gap, the U.S. government borrows money by issuing Treasury securities (like T-bonds, T-notes, and T-bills).

🔹 Why China Buys U.S. Treasury Bonds

China doesn't lend out of charity—it has strategic and economic reasons:

1. Trade Surplus with the U.S. 💰

2. Safe Investment 🛡️

3. To Keep the Yuan Weak (Export Advantage) ⚖️

🔻 So… Why Does the U.S. Borrow from China Specifically?

Because:

• The U.S. needs money (deficits)

• China has excess dollars (from trade)

• Treasuries are the easiest, safest place to park that money

🔁 It’s a Loop:

1. U.S. buys goods from China → sends dollars

2. China earns dollars → buys U.S. Treasuries

3. U.S. uses those funds to keep its government running

4. Interest is paid to China → China reinvests

The game lies in trade deficit which Trump is trying to reduce using hike in trade tariffs and China is trying to counter it by selling the T-Bonds to weaken the dollar value and reduce investments in US market as a result of spike in interest rates which is caused by selling T-Bonds.

So its Tit for Tat game, where each other countries are trying to weaken each other economies.

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