Donald Trump is provoking China on the Taiwan question — and is thereby enraging the United States’ biggest creditor. If China decides to sell its U.S. government bonds, the entire world would be impacted.

The owners of Airbus stock are delighted. Since a trade conflict between China and the U.S. gets continually closer, the price of the European aviation company stock has risen around 5 percent.

According to the underlying logic, if it should come to a real trade war between the two countries, Europeans could be the ones laughing as the third party, as China’s aviation firms order their airplanes from Airbus instead of Boeing.

This way of thinking is, however, shortsighted and dangerous. Even if Europe initially should actually profit from a U.S. crash course with respect to China, it would sooner or later be drawn into the maelstrom that a trade conflict would trigger.

Conflict Sparked by the Taiwan Question

Firms here could not escape the trend; even worse, in the end they would suffer a great deal more than U.S. companies.

The trigger event for all the excitement was a telephone conversation between the future president and Taiwanese President Tsai Ing-wen, who congratulated him on his electoral victory. China was initially silent about this, although it called into question the One-China policy that the U.S. has pursued up until now. This policy says that China and Taiwan are viewed as one nation, and that Beijing is the legitimate representative.

On Sunday, however, Trump threw more wood onto the fire and called the Washington policy of the past 40 years into question during an interview with Fox News.

At this point, Beijing reacted to the call with a government spokesman who warned of worsening relations, and it is being unofficially debated in China how the country might react if Trump goes ahead with his course of action. Investors worldwide are beginning to factor this in.

“China can ultimately bring out the big guns,” warned Bernd Ondruch, managing partner at the hedge fund provider Astellon. “Namely the further devaluation of the renminbi,” he said. China’s currency is still under the control of the Chinese Central Bank; the rate only fluctuates within the narrow margins that it sets. During the election campaign, Trump continually complained that the yuan is undervalued and that this affords China an unfair trade advantage.

In fact, China has continued to allow the devaluation of the yuan bit by bit since the beginning of 2014; since then it has lost around 13 percent toward the dollar.

Central Bank Could Intensify the Trend

It would be easy for the Chinese Central Bank to further carry on this devaluation trend and even intensify it, and thus, further cheapen China’s own products and make exporting more difficult for U.S. firms.

This tactic, however, will only work as long as Trump, for example, reacts to it by imposing import tariffs. Yet in this case, China has a second kind of leverage it could use to damaging effect against the United States.

Because China is Washington’s biggest creditor, China currently owns U.S. government bonds in the amount of around $1.2 billion — and can wreak a lot of havoc if it wants. “China’s greatest weapon is the possible sale of the U.S. bonds located in its possession,” Alan Ruskin, strategist with Deutsche Bank, recently wrote to his customers.

Chinese Could Flood the Bond Market

If Beijing throws these bonds into the market in massive amounts, prices would fall drastically, and in response, the rate of return for American bonds would drastically rise.

In other words, interest rates in the U.S. would explode. The consequence would be a severe reaction in the financial markets, with price losses for stocks and other investments as well. It would, however, also have grave consequences for the U.S. economy and far beyond. “This would choke off the mild recovery of global world trade,” Ondruch says.

Nevertheless, all countries worldwide would be affected. In the meantime, the economy is globally interconnected, delivery chains often pass through many countries, and raw materials and final products are blithely traded back and forth between continents.

It is like a game of dominos — when one stone falls over, the whole row falls over. And Europe would be especially heavily affected. This is shown by a statistic from the International Monetary Fund. It calculated what it would mean for individual countries if China’s exports should decline 10 percent through 2020.

Germany Would Be Heavily Affected

The hardest hit countries would be Germany, Austria and Switzerland; they would lose exports equivalent to around 5 percent of their own economic output.

With that, they are at the top of the Western industrialized countries. Even China’s neighbor, Japan, would only lose around 3.8 percent of its gross domestic product. And the U.S. would suffer the lowest percentage loss of gross domestic product.

Here it would be a matter of only about 1.3 percent of the economic output. In the end, it would primarily be the Europeans, with Germany leading the way, who would suffer most from a curtailment of world trade. Even an additional major order for Airbus equipment from China could not offset it.

By the way, not only the stock prices of the European aviation firm rose sharply in the past days, but also the shares of its American competitor, Boeing.

The background for this was, however, a major contract from Iran — a country with which Trump would like to pursue a course of confrontation, as he has let it be known up to now. To be sure, in tandem with the signing of the contract on Sunday, Boeing immediately shared the fact that the contract would protect 100,000 jobs in the United States.

Trump Wants To Create Jobs

And after all, Trump has proclaimed again and again that he chiefly wants to create jobs.

Wang Jianlin, Chairman of the Dalian Wanda Group, therefore said — not randomly — at a conference in Beijing that the 20,000 jobs that his firm had established in the U.S. would be in danger if it came to a trade war.

Here it will become apparent what is more important to Trump, both with regard to Iran and to China: foreign policy principles or jobs. For the whole world, a lot depends on his decision.

And as he proclaims again and again, it is, after all, jobs that Trump would like to create above all else.