the US Government instead deducted the same amount from the US debt that the Chinese Government owns
That would be equivalent to a partial sovereign default of the US: we don't like you, therefore our bonds you own are now worth less/crap.
More technically, it would be a repudiation of (some) sovereign debt:
Repudiation happens when the sovereign rejects its obligation to pay, which could
happen before or after any payment is due. Governments typically avoid questioning
the validity of their debts, or announcing their intention not to pay before missing a
payment, since in practice, repudiation carries all the traumatic consequences of
payment default [...]. Repudiation may go hand in hand with
governments questioning the legitimacy of one or more obligations. The literature on
“Odious Debt” includes a handful of examples (King 2016, Lienau 2014). In 2008,
Ecuador claimed that two bonds issued by a previous government were illegitimate and
pledged not to pay them. It launched a buyback offer the following year in the shadow
of the illegitimacy claim, and ultimately secured nearly 2/3 debt relief with more than
90 percent of the creditors participating.
Repudiation [...] is rare in modern times. Repudiations most often
occur after a regime change, and examples of repudiations include those in the wake of
communist revolutions—such as Russia in 1917, China in 1949, and Cuba in 1960; Rhodesia
in 1965, after its unilateral declaration of independence from the United Kingdom; Zaire in
1979; Ghana in 1979 and 1982; and North Korea in 1976.
Repudiation can go hand-in-hand with the concept of “odious debt,” which posits that a
government is not obligated to pay for those debts incurred by a previous government contrary
to the interests of the public. Though, the concept has strong moral appeal, it is difficult to
define odious debt in a sufficiently limited way to allow its practical application (Reinhart and
Rogoff 2009). The doctrine has not gained traction with arbitrators, courts, or credit rating agencies (Gelpern 2007; Blair 2014) and, the earlier example of Ecuador aside, states tend not to assert it explicitly.
As for effects, that's harder to predict. China would probably accelerate its sales of US treasuries, since the US move you propose is not going to impact all their holdings at once. The sooner they would sell, the fewer losses they would incur over time from the proposed US tax-like measure. On the other hand, selling too much too soon would hurt them too by dropping the price too much.
Russia substantially reduced its holding of US treasuries in 2018, presumably just based on fears:
Between March and May, Russia's holdings of US Treasury bonds plummeted by $81 billion, representing 84% of its total US debt holdings. [...]
"One theory is that this was Russia's revenge for US sanctions," said [Jason ] Bush [an analyst at consulting firm Eurasia Group].
Another theory is that Moscow feared further US sanctions that could cause its holdings of US debt to be frozen or even seized.
The Russian side didn't acknowledge this explicitly, but their central baker said something like
Russia assesses "all the risks: financial economic and geopolitical."
Russia however held a lot fewer US treasuries, only around 1/12 of China's even at their peak holdings. So Russia could sell the bulk of theirs relatively quickly.