Commentary by Nordea's chief Asia analyst, Amy Yuan Zhang

Zhuang says that the firm maintains their view that neither a yuan devaluation nor dumping of US Treasuries is a valid weapon against US tariffs as they are both associated with certain costs and do not present any clear benefits to China.

"At least initially devaluation would require loads of USD buying (and CNY selling) and therefore ultimately also USD asset buying. So, this is not really a strong weapon (due to the USD asset buying) even though it would probably annoy Trump if China should decide to devaluate the yuan. When disregarding the turbulent years of 2015-16, China has accumulated US Treasuries alongside foreign currency reserves in USD. Renewed USD buying through devaluation of the CNY would most likely be accompanied by the purchase of US Treasuries", she argues with regards to a yuan devaluation.

As for China dumping US Treasuries, she says that it is unlikely as it would lead to a stronger CNY and a weaker USD - thereby "helping the US to close the trade gap".

To end, she notes that both scenarios are unlikely to materialise but that she considers the risk of a yuan devaluation to be higher than the risk of China dumping US Treasuries. However, she argues that a devaluation of the yuan would only add to the list of potential USD positives.

It's a similar view shared by Nordea's Andreas Steno Larsen yesterday here.