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The Graphic Truth: The foreigners who hold US debt
The US is the world’s biggest debtor, with more than $35 trillion of securities outstanding.
About a quarter of that is held by foreign investors, a detail which has drawn considerable attention since Donald Trump began walloping the world with tariffs to rebalance US trade ties and military alliances. That’s because if countries upset – or merely uneasy – about Trump’s policies sell those securities in response, the debt servicing costs for the US rise. This is no small matter on $35 trillion worth of paper.
In fact, one widely held explanation for Trump’s abrupt suspension of the “Liberation Day” tariffs on April 9 was that wary bond investors had begun to sell US Treasuries: In the week of April 11, yields on 10-year US treasuries saw their biggest leap in a quarter of a century, a sign that creditors were dropping US sovereign debt fast.
Could countries weaponize US debt more directly? China, Trump’s biggest trade war target, is the second largest foreign US creditor, officially holding more than $750 billion.
A selloff could be devastating. But analysts say it would be hard to find enough buyers for a sale that is both swift and large enough to catch the US off guard.
And even if it were possible, a seller would risk their own financial security as well global economic health by kneecapping the US. In other words: It would be, in financial terms, the nuclear option.
The graphic above looks at which countries hold the most US sovereign debt. Note that the last official data precede Liberation Day and that they depend on official reporting. Some countries may hold more than what is listed here via third parties.
Trump's tariffs & the end of globalization
Ian Bremmer's Quick Take: It is the day after 'Liberation Day,' April 2nd. I'm not sure that day is going to stick. It was good not to do on April 1st. Not only because it's April Fools, but also because you had a couple of key elections in the US, in Florida and in Wisconsin. And Trump clearly wanted to go after that because he knew that these weren't going to be super popular. And yet, this is exactly what he was promising.
He has been promising tariffs. He's been promising securing American borders, securing borders from people coming into the US illegally, also securing US borders from unfair trade practices. And that is precisely what we're seeing right now. Overnight, the United States is moving to having the highest tariffs against countries of any major economy in the world by a very long margin, and also the largest average trade tariff in over a hundred years.
This is a new era. It's a post globalization era. It's a post post-war era. It's kind of the equivalent of what the Brits did with Brexit just on a global scale. Now, why these tariffs and what's behind the percentages? Because Trump's been talking about reciprocal tariffs for a very long time, and yet these aren't reciprocal. There are no countries that have the percentage tariffs on the US that the US is now putting on them in terms of goods. So how did they do that? That's the extraordinary thing, is the calculation wasn't based on the tariffs that are imposed on US goods. Rather, it was a look at the trade deficit that the US runs against those countries and taking the percentage of what the trade deficit is and applying a tariff that would get you to parity. In other words, what reciprocal from Trump's perspective is whatever would actually bring that trade deficit into trade neutrality and then just impose half of that, which makes no sense economically whatsoever.
Why not? Well, first of all, because there are a lot of poor countries around the world that have trade deficits with the US because they can't afford American goods, and the US wants to buy commodities, for example, from those countries or low tech manufacturer like from Bangladesh. And are you angry because the Bengalis aren't capable of buying Teslas from the US or buying smartphones? And the answer is, of course not. And all that's going to be is a tax. The US government will pick up revenue and the Americans will have to pay more for inexpensive goods that the US isn't going to produce. Some cases, these are goods that the Americans not only wouldn't want to produce because the labor quality and cost is really, really low and no one's going to do that work, especially when you're closing borders and taking illegals out of the population. But also, because the US economy couldn't produce them.
I mean, your tropical fruits, I mean some of them can be in the United States, but most of them need to come from other places. Coffee beans, I mean all sorts of things that the Americans are just not going to be substitution effect producing that now are just going to be higher costs for the United States, for average Americans. And then in places where the US was not in deficit, then you're just throwing a 10% tariff against. Why? Is that about fair trade? No, that's just about the Americans wanting to ensure that there are tariffs on absolutely everyone. It reminds me of the January 6th conversation where originally Trump was talking about, "Well, maybe we've got to look more carefully at all the really violent types and we're not going to want to give them amnesty. But there are a lot of people that were treated very badly, very unfairly, and so they should have amnesty and they should be pardoned."
And as the details and the debates on who should and shouldn't get a pardon came out, Trump got sick of the debate, got sick of the nuance, and said, "I'm just giving it to everybody." And I think that's what happened with tariffs. There were debates going on with large numbers of advisors around Trump, right until the last minute and he just said, "Ah, I'm just putting tariffs on everybody." And that's what's happened. And now there will be individual deals that will be cut with a bunch of countries to try to get out of that. But the reality is that the biggest trade partners of the United States, there's no quick fix. Not with Europe, not with Mexico, not with Canada, not with China. And given that, we are clearly not only out of a US-driven globalization era... That's been gone for some time now. Globalization has been moving apace, but the US has not been driving it.
The US had been kind of standing on the sidelines and pushing their own industrial policy. But now you have the United States actively unwinding globalization. And the question will be how effective will other countries be in playing defense, in hedging, and in bringing some production, more production to the United States? Because in the near-term, you expect to see a lot of countries will try to limit the damage that's being done. And the US economy is, of course, stronger and more powerful. So that will mean that a lot of countries won't immediately do reciprocal tariffs, but will try to cut deals with the Americans. A lot of companies will try to find ways to manufacture more in the US. That's near-term.
In the medium and long-term, there will be hedging. There will be efforts to find ways to de-risk their economies from the United States, from the uncertainty, the volatility, the high costs. And sure, you'll want to produce things in the US for US consumers, but most things are not being consumed by Americans. And that is increasingly true around the world. And therefore you wouldn't want to produce most things in the US in that environment. So you'll see more hedging of the Europeans towards other countries, including in some non-AI fields towards China. And I think you'll see that in bigger ways in the Global South who already have their principal trade partners as China anyway.
And then final point is keep in mind that the Americans are not really good at being patient. And Trump has been talking the entire way, not one of the most patient people in the world that, "Look, I mean, yeah, they're going to be costing in the near-term, and I don't care if the cost of cars go up. But long-term, this is good for Americans." And certainly near-term there's going to be a significant economic hit, not just in the stock market, but also in US GDP and also in inflation. And Americans, I suspect are going to be pretty angry about that because Americans are very short-term in orientation. It's a nature of free market capitalism, kleptocratic or not in the US and it's also the nature of the political system.
So that's where we are. A lot to think about on the back of these unprecedented policy moves. And remember, it is a marathon, not a sprint. We are only a couple months in. Trump has four full years, and a lot is going to happen over the course of that administration. And I'll be here to talk to you about it. Thanks a lot, and I'll talk to you all real soon.
Trump & Elon's grand plan to liberate you EVEN MORE
Trump is worried that Liberation day was a flop. Elon Musk has some ideas for how to make it Great Again. #PUPPETREGIME
Watch more of GZERO's award-winning PUPPET REGIME series!
President Donald Trump, seen here on the South Lawn of the White House in February, is set to unveil his "Liberation Day" tariffs.
Trump’s tariff plan to take effect
T-Day has arrived. On Wednesday afternoon, Donald Trump’s reciprocal tariffs on US trade partners will take effect immediately after a Rose Garden announcement.
The devil’s in the detail: Trump has reportedly settled on the main aspects of the plan, and has been talking over the fine print with his top advisers. The administration has reportedly weighed a few different options for the overall scheme, including imposing different tariff rates on each trading partner, targeting specific countries, or enforcing a blanket tariff — possibly as high as 20%.
The pros and cons: By building a tariff fortress around the world’s biggest economy, Trump is fulfilling a campaign pledge while also seeking revenue to offset tax cuts. US steelmakers and other domestic manufacturing have supported the targeted use of tariffs, citing unfair import competition, but have come out against blanket tariffs or tariffs on Canada – which particularly hurts the auto industry.
Meanwhile, Wall Street fears it could trigger a recession and slow global growth as small businesses and consumers may face rising prices as imports become more expensive. The Yale Budget Lab projects the policy will equate to a 13-point hike in the US effective tariff rate, raising prices by 1.7-2.1% and lowering real GDP growth by 0.6-1.0 percentage point in 2025.
“Markets are bracing for a seismic shift as Trump’s global reciprocal tariffs loom,” says Eurasia Group trade and global supply chain expert Nancy Wei. “The mix of rising inflation and slowing industrial activity signals a precarious balance, with businesses scrambling to front-load inventory and mitigate pricing uncertainty.”
“With demand weakening and costs climbing, companies are navigating an increasingly challenging economic landscape.”
For more insights from Nancy Wei, check out our Viewpoint about “Liberation Day” here.President Donald Trump speaks from the Oval Office flanked by Commerce Secretary Howard Lutnick on the day he signed executive orders for reciprocal tariffs, Feb. 13, 2025.
Opinion: Searching for signals on ‘Liberation Day’
Now in its third month, Trump 2.0 has sustained a breakneck pace. In recent days, the administration announced 25% tariffs on automobiles, conceived of secondary tariffs for nations buying oil from Venezuela (and potentially Russia and Iran), and reiterated its interest in “getting” Greenland.
Market participants have held their breath for Wednesday – “Liberation Day” – as the administration is set to unveil global tariffs, the lynchpin of its America First trade policy.
As the zone has flooded, predicting the current administration’s next moves has become an Olympic-level sport. Details of a group chat between senior administration officials that leaked last week – the so-called Houthi PC small group – provide allies, adversaries, and watchers with revealing insights into the administration’s foreign policy blueprint.
Reestablishing deterrence
While campaigning, President Donald Trump was fond of saying that no wars broke out during his presidency and that the conflicts in Ukraine and Israel-Gaza would never have happened if he had been president. In the run-up to his inauguration, Trump promised to end the war in Ukraine on his first day in office (later extended to within six months). On Gaza, Trump posted on social media that Hamas would have “all hell to pay” if they did not release Israeli hostages before he was sworn in.
Whether the administration was prepared to back up these threats with action hung as a giant question mark. During his first term, Trump largely avoided large-scale security operations. The major exception was the January 2020 assassination of Qasem Soleimani, commander of Iran’s Quds Force. This time, the risk of threatening “all hell” is that to establish credibility, you may have to administer “all hell.”
On March 15, the US military began conducting a series of air strikes on Iran-backed Houthi militants in Yemen – the operation at the heart of the group chat.
Exchanges in the chat tell us this use of force was strategic by design.According to the transcript, after Vice President JD Vance shared concerns about conducting the attacks, Secretary of Defense Pete Hegseth countered, “We are prepared to execute, and if I had final go or no go vote, I believe we should. This is not about the Houthis. I see it as two things: 1) Restoring Freedom of Navigation, a core national interest; and 2) Reestablish deterrence, which Biden cratered.” The message is clear: this is not about the Houthis; this is about the Trump 2.0 administration telegraphing its willingness to carry out “all hell.” TheUS has reportedly deployed B-2 bombers and cargo planes to the region as a further indicator of the administration’s apparent willingness to conduct additional strikes.
A ledger of allies
Hegseth’s remarks also reveal another principle of the Trump 2.0 foreign policy: Isolationism is dead, long live America First. During the first Trump administration, there was a sense that the president’s focus on rebuilding manufacturing jobs and tightening immigration meant that the US was taking its ball and going home. Now, Trump and his team are scanning the horizon, looking for angles, and from Greenland to Canada to Venezuela and Yemen,no stone is being left uncovered.
Since Oct. 7, 2023, Houthi militants have targeted shipping assets traversing the Red Sea, depressing trade through the channel and setting off a global rerouting of trade. Trump ordered the sea lanes reopened. As laid out in the group chat, the administration sees it as the US's role and a core national interest to restore freedom of navigation. In fact, according to Hegseth, “VP: I fully share your loathing of European free-loading. It’s PATHETIC. But [US National Security Advisor Mike Waltz] is correct, we are the only ones on the planet (on our side of the ledger) who can do this. Nobody else even close.”
Much has been made of the anti-Europe tone of the conversation. Anyone sitting in European capitals will certainly be disappointed by the language and accompanying content that the US will be looking to Europe to foot its security bill. But anyone sitting in European capitals hopefully already knows to expect this. That Trump (like President Barack Obama before him and President Joe Biden after him) wants to see Europe pay more for its collective defense is not new or news. What should, however, buoy Europe is that the US still counts itself on the same side of the ledger as its Western allies and that it feels a responsibility – a unique responsibility – toward them. This is not a case of the US pulling up the drawbridge. This is a US administration taking aim and looking for others to help settle the bill.
There can be no doubt that following the daily turns of the US administration can leave the rest of the world gasping for air. In his second term, Trump’s true north is legacy – perhaps even athird term. Through a relentless drive on tariffs, secondary tariffs, sanctions, export controls, and other measures, he is further aligning national security and economic security toward an ambition of bringing revenue and investment back to the US. This is a years-long project, beginning on Liberation Day, and no three-month period can definitively judge its outcome. The administration initiated the Houthi operation to backstop its economic policy prong with a hard-power policy prong. Going forward, when threats of a “bad situation” or of bombing Iran are made unless a deal is struck, they will carry weight.
Still, Trump hopes that his “proudest legacy will be that of a peacemaker and unifier.” The US is not leaving the world alone, for better or for worse.
Lindsay Newman is a geopolitical risk expert and columnist for GZERO.
President Donald Trump holds an executive order about tariffs while flanked by Commerce Secretary Howard Lutnick in the Oval Office on Feb. 13, 2025.
Viewpoint: What to expect from Trump’s tariff “Liberation Day”
As in other parts of his agenda, President Donald Trump has wasted no time pursuing his goal to rebalance trading relationships and revitalize US manufacturing by imposing tariffs on imports. Also, like other parts of his agenda, the tariff rollout has been chaotic, with some new measures announced, then delayed, and later reimposed.
Despite the concerns of business leaders and investors about the economic impact of these measures – which have prompted a stock market sell-off – Trump remains committed to his approach. He argues that any short-term pain will translate into long-term gain as businesses move their operations to the US and plans to announce a sweeping new round of tariffs on April 2. We asked Eurasia Group expert Nancy Wei what to expect from what Trump is billing as a “Liberation Day” from an unfair global trading system.
What measures would you highlight?
We are expecting reciprocal tariffs on countries around the world and announcements of new probes that lead to tariffs on specific product categories. Reciprocal tariffs are set in response to other countries’ trade barriers, including tariffs, taxes, and different types of non-tariff trade barriers. Another important criterion is the existence of a trade surplus with the US, seen by the Trump administration as evidence of unfair trade practices. Reciprocal tariffs apply to all goods a country exports to the US.
Which countries do you expect to be targeted?
There are three groups. The first includes trading partners with large trade surpluses with the US or that Trump has threatened to tariff for other reasons. China, Mexico, Canada, the EU, India, Vietnam, Japan, South Korea, Brazil, Malaysia, Thailand, and Indonesia all have large trade surpluses with the US. Denmark has drawn threats of tariffs for its unwillingness to discuss transferring control of Greenland to the US, while the EU has drawn Trump’s ire for its low defense spending. We expect Trump to use the International Emergency Economic Powers Act to apply tariffs on these countries immediately. After imposing 25% tariffs on Mexico and Canada on Feb. 1, Trump agreed to pause them a few days later. We expect the 25% tariff to fully take effect soon after April 2 (with a 10% carveout for Canadian energy products).
Countries in the second group (which have lower trade deficits) and in the third group (the rest of the world) will remain vulnerable to reciprocal tariffs later in the year. The risks for those in the third group will rise over time as countries in the first two groups (especially China) seek to route shipments to the US via those in the third group to avoid tariffs.
It sounds like US consumers should brace for higher prices on products from about a dozen countries after April 2. Can you give us a sense of what they export to the US?
Yes. The products affected will include autos from the EU, Mexico, Japan, and South Korea; electronics from China, Mexico, the EU, India, Vietnam, Japan, and South Korea; and consumer goods from China, Mexico, the EU, and Vietnam. That’s just a small sample.
What sort of retaliation should we expect from these countries?
Most countries in the crosshairs of Trump’s trade policies have signaled cautious responses and will seek to either negotiate concessions from the US administration or respond with carefully calibrated measures of their own. China, for example, has already responded to a first round of 10% US tariffs with retaliatory tariffs on liquefied natural gas, coal, farm machinery, and other US products. It has signaled it will respond against any additional US measures as they take effect. Mexico has indicated it will respond with measures targeted at US agricultural goods from Republican-leaning states with the aim of causing pain for producers there that will force the US to the negotiating table. The EU has said it is prepared to respond with proportionate counter-tariffs on US goods but will initially seek a negotiated settlement with Trump.
What product-specific tariffs are expected?
Trump has already announced 25% tariffs on imported automobiles, steel, and aluminum. His administration has announced a probe into trading conditions in the copper sector that is expected to result in tariffs. On April 2, he is expected to launch similar probes for several other sectors – including semiconductors, agriculture, and pharmaceuticals – that would result in tariffs by the end of this year or early next year. Trump has indicated he would like to protect the US agricultural industry from the expected retaliatory measures from US trade partners.
What will be the short- to medium-term impact of these policies?
We are projecting that average US tariff levels will probably rise this year to levels not seen since the 1940s. The resulting price increases for consumers, retaliatory measures against US firms, and general climate of uncertainty are likely to reduce the level of US economic output by 1.5% over the next year or two and cause a 1.5 percentage point increase in inflation. However, economic models are not well-equipped to estimate the impact of mass tariff hikes. We think it could be much greater in an extreme scenario, on the order of a 3% reduction in economic output and a 3 percentage point increase in inflation.
Edited by Jonathan House, Senior Editor at Eurasia Group.