The outcome of the trade war and ongoing negotiations between the world's two largest economies is a looming danger, BlackRock CEO Larry Fink told CNBC on Sunday — but not for its immediate impact on markets or growth. The threat Fink articulated, according to him, is one that's not being discussed much, but needs to be: The long-term impact of the U.S.-China trade war on U.S. Treasury bonds. "What worries me about the conversation between the U.S. and China — China has a $1.3 trillion pool of U.S. Treasurys, they've been accumulating U.S. Treasurys because of the trade deficit," Fink told CNBC's Hadley Gamble in an interview. "Now as China reduces its trade deficit with the U.S., the likelihood of them reducing their need for U.S. Treasurys is large," he added. China is the biggest foreign buyer of U.S. sovereign debt. In January, media reports revealed that officials in Beijing recommended the Chinese government lower — or even stop — its buying of U.S. debt. That prospect is something market analysts have described as a major threat to markets as Treasury financing needs climbed significantly in 2018 and U.S. debt issuance heads toward record highs.

Larry Fink at the 2016 World Economic Forum in Davos, Switzerland. David A. Grogan | CNBC

And as CEO of the world's largest asset management fund, Fink always has his eye on the long term. He explained that "over the next few years — and this is something we are not talking about enough and we need to be talking about this — we should expect over the number of years ahead, less ownership of U.S. Treasurys as their deficits shrink. "But that's at the same time the U.S. deficit still seems to be growing at a trillion dollars," Fink added. "So it is long term a little more disturbing for me to see the implications of smaller Chinese purchases of debt with rising deficits." He asked: "So the bigger question is: who's going to be the substitute buyer to buy this?"

China's trillion-dollar weapon

As the trade war kicked off in spring of last year, economists warned of China's "trillion-dollar weapon." Several warned that said that the Chinese could dump its massive holding of Treasurys as retaliation, which would wreak major havoc on international markets and spike U.S. borrowing costs.

We're going to see some winners, we're going to see some losers — but long term, the U.S. Treasury bid is a loser in this. Larry Fink CEO, BlackRock

China has steadily pared down its holdings of U.S. sovereign notes, bills and bonds for the last several months. It held $1.123 trillion in U.S. Treasury debt in December of last year, down from $1.184 trillion in the same month of 2017, according to U.S. Treasury Department data. America's second-largest debt buyer is Japan, which has also been cutting its holdings: It's currently down to $1.042 trillion in Treasurys, from $1.061 trillion in the same time frame. Still, the threat to U.S. debt may be overblown, some argue. China dumping its U.S. debt holdings would likely backfire on itself, as it would have to sell some of its Treasury holdings at a loss. That would result in a loss of capital and simultaneously weaken the U.S. dollar, which would in turn make American exports more attractive. And other countries could also step in to buy those bonds, keeping interest rates stable. Over the last several years, China has bought scores of treasury bonds partly because it has the U.S. dollars it needs to spend. Just like any investor, China wants to park some of the greenbacks made from exports to the United States into safe investments, and there's nothing perceived to be safer than U.S. bonds.

US Treasury bid 'is a loser in this'

But demand for America's sovereign bonds is set to wane, Fink warned. "At the same time, the global bond indexes are now including more Chinese debt, and next year one of the big indexes is going to include up to 6 percent Chinese debt, which reduces U.S. demand by 2.6 percent of their debt," he said. "So all of these things are playing out. We're going to see some winners, we're going to see some losers — but long term, the U.S. Treasury bid is a loser in this," he said, adding that an expanding U.S. economy could theoretically help offset those losses.