The US is opening a new front in the trade war: capital markets. The treasury is considering curbs on US pension funds buying Chinese equities. It says it does not plan to ban Chinese listings in the US, but raising the very possibility will deter some candidates.

On the surface, China has more to lose from a tit-for-tat fight over capital markets. But the spat could backfire for the US, whose immediate priority is gaining leverage in trade talks.

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