Speculation is rife that the trade tension between the U.S. and China will increase this year. These signs have already started to build up in the space with the spate of news.

First, the latest Bloomberg report states that China may slow down, or even stop, the purchase of U.S. government bonds, citing that U.S. debt has become less attractive than other assets. Since China is the biggest buyer of U.S. sovereign bonds holding $1.2 trillion of U.S. debt, the action could lead to a broad sell-off in the equity markets. However, China’s regulator called it a possibly “fake news” and denied the report.

Secondly, Chinese media criticized the recent passage of two bills by the U.S. House Foreign Affairs Committee aimed at bolstering the critical U.S.-Taiwan partnership. The Global Times, a nationalistic arm of the Communist Party media apparatus states “Beijing’s diplomatic retaliations toward Washington will come from all sides.” Since 1979, Washington has cut off diplomatic ties with the government in Taipei under the “One China” policy, which recognizes the East Asian island as part of China.

Further, the United States has blocked two Chinese high-profile deals over national security concerns. One is Ant Financial’s $1.2 billion purchase of transfer firm MoneyGram International and the other is the Huawei Technologies deal with U.S. carrier AT&T (T – Free Report) to sell its smartphones in the United States. The back-to-back Chinese investment setback in a week has threatened China-U.S. trade ties.

The move came as the Trump administration is gearing up for new trade penalties against China in the coming weeks, including potential tariffs on steel and aluminum imports and punitive actions against China arising from an investigation into Beijing’s alleged theft of intellectual property. The United Sates is also mulling to impose tariff or import duties on Chinese solar panels and washing machines manufactured in China and its neighbors. If this happens, this would lead to retaliatory measures from Beijing, indicating the beginning of a trade war with implications for the entire world trading system.