In this post, I examine the steps Xi Jinping could take to try to cripple the U.S. economy through financial warfare, along with the range of U.S. responses that could follow. I also offer a net assessment of who might prevail. While a full-scale economic war with the PRC may still be a low-probability event, the odds are higher today than they were yesterday. It’s time for some serious scenario planning for sure.

For the last two decades of China’s economic rise, China-watchers have talked about the dangers of having an adversary who holds so much of their wealth in instruments like U.S. Treasury Securities (T-notes, T-bills, T-bonds). The simple threat is that if those are rapidly sold the value of the securties will drop, causing interest rates to spike, harming all other holders of the securities and inflicting costly damage to the U.S. economy.

But this is not the only lever Xi Jinping has to inflict economic damage on the U.S. Additionally, the U.S. is not without options in response to an adversarial economic challenge. Multiple statutes give the President emergency powers over many levers of the economy that can be used in crisis.

If Xi Jinping decides this is the time to cause a downfall of the U.S. he may decide to use every lever he has at his disposal. This may well be his last decision, but if he makes this decision his action plan (which I named Operation Red Tide for this scenario) may look like this:

Operation Red Tide

Operation Red Tide would begin with an overt campaign of economic aggression designed to inflict maximum disruption on the U.S. financial system. Xi would start by ordering the complete and immediate liquidation of all U.S. equities held by Chinese state entities, sovereign wealth funds, and affiliated individuals. This mass selloff, hitting blue-chip stocks, major ETFs, and tech sector anchors, would likely trigger a cascading collapse in the American stock market, driving losses deep into pension funds, institutional portfolios, and individual retirement accounts. At the same time, Beijing would dump its substantial holdings of U.S. Treasury securities, forcing yields sharply upward, destabilizing bond markets, and increasing federal debt service costs.

Simultaneously, China would enact a capital flight reversal directive, compelling all Chinese nationals and companies to liquidate U.S.-based assets and return funds to the mainland. This would devastate commercial and luxury real estate markets in key U.S. cities like New York and San Francisco, while also draining liquidity from U.S. banks and investment firms. Xi would then formalize China’s break from the dollar system by declaring a new era of de-dollarization, ceasing all USD-based transactions for PRC foreign trade, promoting renminbi-denominated energy purchases, and accelerating digital yuan infrastructure across BRICS-aligned nations.

The next blow would come in the form of mass divestment from U.S. corporate credit instruments. Chinese institutions would rapidly offload U.S. corporate bonds, mortgage-backed securities, and commercial real estate debt, disrupting credit markets and further choking off capital access for U.S. businesses. In parallel, the PRC would unleash a wave of cyber and logistical disruptions targeting U.S. financial institutions, ports, and supply chain infrastructure with the aim of stalling manufacturing, delaying shipments, and sowing public uncertainty.

Xi would escalate by seizing the physical and financial assets of U.S. firms operating in China. Apple factories, Tesla facilities, and Fortune 500 supply chain hubs would be nationalized under emergency economic security laws. U.S. consulting firms, cloud providers, and logistics companies would be expelled. All of this would be framed by a nationalist campaign mobilizing China’s population under wartime economic footing with rationing, propaganda, and total industrial redirection in service of a protracted confrontation with the West.

Finally, the operation could be punctuated by strategic geopolitical signaling, such as the blockade of the Taiwan Strait or the temporary disruption of TSMC chip exports to the U.S. and its allies. This act alone would ignite panic across the global semiconductor industry, dealing another hammer blow to markets already in chaos.

Taken together, Operation Red Tide would represent a coordinated, multi-domain economic war plan intended not just to pressure the U.S. government, but to break the economic backbone of the U.S. system. It is a strategy born of desperation, but executed with the precision of a regime that has long studied American vulnerabilities. The costs to China would be enormous, but if Xi concludes that survival of the Party depends on reshaping the global order, this may be the final card he plays.

What would the U.S. response be? I’ll call this one Operation Enduring Ascent:

Operation Enduring Ascent

The moment Operation Red Tide is detected in motion, the United States would respond with a full-spectrum economic, financial, and strategic counteroffensive. Operation Enduring Ascent would be designed not merely to defend against China’s actions but to preserve the long-term stability of the American economy, safeguard the wealth of its citizens, and reassert U.S. leadership in a post-globalization order.

The President, invoking emergency powers under the National Emergencies Act, the International Emergency Economic Powers Act (IEEPA), and the Defense Production Act (DPA), would act swiftly to stabilize financial markets. Trading suspensions would be triggered on select U.S. equities to stop the bleeding from China’s sell-off. A temporary ban on short selling across strategic sectors would go into effect, coupled with heightened scrutiny and approval requirements for all large-scale foreign liquidations. The Department of the Treasury would initiate direct market support operations, deploying stabilization funds to backstop broad market indexes and heavily held ETFs, ensuring that retirement accounts and pension funds remain intact through the initial shock.

The Federal Reserve, in coordination with the Treasury, would enter emergency liquidity mode. Massive open-market operations would be launched to absorb the flood of U.S. Treasuries dumped by China, preventing a spike in yields and preserving credit stability. Yield curve control measures would be implemented, and dollar swap lines with key allies would be expanded to maintain global confidence in the U.S. dollar. Emergency capital controls would be enacted, temporarily halting further adversarial liquidation and closely monitoring all cross-border capital flows to identify and neutralize additional threats.

Simultaneously, the administration would take aggressive steps to protect American households. Temporary federal guarantees would be issued for retirement accounts, particularly those invested in large-cap indexes under attack. Required Minimum Distributions would be suspended, early withdrawal penalties waived, and new Treasury-backed savings instruments would be offered as safe harbors. This would blunt the psychological impact of a market crash and prevent mass liquidation of retail accounts.

Retaliatory measures would follow quickly. All Chinese sovereign assets in the U.S. would be frozen. PRC banks would be expelled from the U.S. financial system, losing access to Fedwire and dollar-clearing mechanisms. The SEC would immediately delist all PRC companies from U.S. exchanges and bar future capital-raising activity by any Chinese-affiliated firm. CFIUS would expand its remit to seize PRC-owned real estate, farmland, and industrial assets, particularly those near sensitive infrastructure or defense sites.

Immigration and influence countermeasures would be swift. All Chinese student visas in STEM fields would be revoked, and new ones suspended. Visas for PRC executives, researchers, and tech professionals would be canceled, and Chinese-linked nonprofits operating under United Front Work Department influence would lose their tax status and be shut down. U.S.-based assets of these organizations would be frozen pending investigation.

The U.S. would move quickly to take every action in its power to disconnect the PRC from the broader Internet. This is a challenge given the distributed governance mechanisms of the Internet but one U.S. technologists and policy leaders will work hard at executing on. Attempts to disconnect the PRC from the Internet will at least slow the constant attacks from the PRC and make the IP theft that fueled their rise at least a little bit harder for them to execute on. We can also expect coordinated government action to use cyber operations targetted at every major offensive cyber organization in the PRC to mitigate their ability to attack U.S. infrastructure and ensure U.S. systems are able to operate in crisis.

Strategically, the U.S. would initiate a rapid decoupling. The Defense Production Act would be activated at scale to onshore semiconductor manufacturing, pharmaceuticals, and critical minerals. Federal procurement would be redirected toward domestic suppliers and allied partners. Tariffs on non-PRC alternatives would be dropped, and new bilateral trade agreements would accelerate a shift away from Chinese dependency. Parallel to this, the U.S. would convene an emergency G7 summit to orchestrate a coordinated Western financial defense, including reciprocal sanctions, market liquidity pools, and new reserve frameworks designed to insulate the liberal economic order from authoritarian coercion.

Taken together, Operation Enduring Ascent is not merely a defense mechanism—it is a systemic realignment. It marks the end of the post-Cold War assumption that economic interdependence ensures peace. The operation would be painful, especially in the early phases, but its goal is to emerge with a more resilient, sovereign economic foundation. By reshaping the American industrial base, severing strategic exposure to adversaries, and galvanizing allied coordination, it repositions the United States for enduring economic leadership in a more contested world.

The Net Assessment in the PRC vs U.S. Economic War

I feel totally unqualified to offer a definitive projection on the results of a PRC vs U.S. economic war. But I also don’t believe anyone else can offer one either, at least not with certainty. Still, strategic planning demands that we attempt to map potential outcomes. The most prudent approach is to plan for multiple futures, each grounded in varying assumptions, degrees of risk tolerance, and velocity of action. However, one foundational belief informs this analysis: the American system, while chaotic, is more resilient and adaptable than the centralized structure of the CCP controlled PRC psudo capitalist marxist hybrid. Our distributed power, open innovation, rule of law, and private enterprise systems give us the tools to not only survive such a confrontation but to emerge stronger. If confronted directly and forced into a total economic conflict, I believe America and our people will adapt, mobilize, and accelerate our transformation. The result could be a more self-sufficient, strategically hardened U.S. And for the PRC, they will be set back by at least a generation.

Realizing all plans should consider multiple scenarios, I offer one for discussion purposes.

In the early days of a full-scale economic war between the PRC and the United States, the shock would be severe. U.S. equity markets would plummet under the weight of coordinated Chinese asset liquidations, triggering widespread investor panic. Yields on U.S. Treasuries would spike as Beijing dumps its holdings, risking a liquidity crisis and threatening to ignite both inflation and recession simultaneously. Supply chains would seize up as Chinese exports are halted, whether by embargo, political directive, or PLA-linked logistical disruption. Consumer prices would rise sharply. Confidence in U.S. markets could falter, especially among foreign investors and the American public, with retirement accounts and savings vehicles taking visible hits. At the same time, China’s own financial system would come under internal stress. Capital flight would surge, the yuan would be attacked in currency markets, and the PRC’s carefully managed economy would face pressures it was never designed to absorb at this speed or scale.

However, as Operation Enduring Ascent unfolds, the U.S. response would be rapid, coordinated, and decisive. The federal government would stabilize financial markets, protect retirement accounts, and initiate a full industrial mobilization. Treasury and Fed coordination would absorb most of the impact from Chinese divestment. Capital controls and emergency rules would prevent cascading sell-offs. The Defense Production Act would be activated at scale. Strategic sectors like semiconductors, pharmaceuticals, and energy storage would be pulled back onto American soil under federal mandate and private sector partnership. Tariff structures would be rewritten to privilege allied supply chains. The economic pain of the early phase would be real, but the system would bend rather than break.

For the first time, the coordinated power of U.S. cyber operations will be unleashed on hostile actors in the PRC dramatically reducing their ability to disrupt infrastructure to the point that it will not be a factor as the PRC considers its ability to respond.

China, meanwhile, would face a more severe long-term consequence. By openly weaponizing its economic leverage, it would destroy trust among its remaining trading partners. Its access to global capital would vanish. Multinational firms, already uneasy, would flee en masse. As the Chinese people suffer under rationing, restricted mobility, and job loss, internal pressure would mount. The narrative of national greatness would erode under the reality of material deprivation. The Party would respond with even more repression, but the economic miracle that sustained legitimacy would be over.

Within two to three years, the U.S. economy would be transformed. It would be leaner, more nationally oriented, and more secure. Energy independence would expand. Food security, already strong, would be leveraged for diplomatic advantage. Industrial production would increase as a percentage of GDP. Most importantly, the nation would have reestablished the principle that sovereignty is not for sale, and that an open society can, when pushed, outlast even the most meticulously planned authoritarian campaign.

This isn’t to say victory would come easily. Many sectors would suffer. The costs would be enormous. But the core of the American system: free enterprise, adaptive governance, technological leadership, and allied cooperation, gives us a long-game advantage. A confrontation of this scale would mark the end of an era. But the next era, shaped by those who endure, would be ours to lead.

The Big Point

Intelligence is about forewarning and eliminating surprise. This is always a challenge. But review of these scenarios can help eliminate some surprise by conceptualizing possible future events.

For many of us the specific scenarios here may sound like worse case scenarios. No one wants global economic war. It could deteriorate into a military conflict between two nuclear powers, something that could put the world at risk. But just because a scenario is the worst case does not mean it is the least likely scenario. Planners should consider how this future would impact business and government operations as well as our personal situations.

Which means every business should be mounting a dedicated scenario planning effort to consider what the range of futures may mean for your strategic positioning today.