China is using its huge trade surplus to buy oil at any price, pushing up gas and diesel costs and US interest rates at the same time — bad news for American drivers, borrowers, and the bond market.

• China runs the world's biggest trade surplus, over a trillion dollars a year, and for decades that money flowed back into US Treasuries.
• Now China is spending that cash on oil instead, outbidding every other buyer and squeezing supply.
• Higher oil prices push inflation up, and inflation pushes US bond yields and interest rates higher.
• The US can't hit back by sanctioning Chinese banks without wrecking its own bond market, and threats haven't worked either.

Outlook: As long as China keeps buying oil instead of lending to the US, expect gas and diesel prices to stay high and interest rates to stay under upward pressure.