In March, China decreased its holdings of US Treasuries by $18.9 billion, falling to third place among foreign holders behind Britain. This reduction occurred before April’s sharp sell-off triggered by President Trump’s tariff announcements. Britain surpassed China to become the second largest foreign holder of US Treasuries, increasing its holdings by $29 billion. The overall foreign holdings of US Treasuries reached a record high of $9.05 trillion in March.
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Moody’s downgraded the U.S. government’s credit rating from Aaa to Aa1, citing escalating debt and repeated failures to address it across administrations. This makes the U.S. the first to lack a top-tier rating from all three major agencies in over a century, following similar downgrades by S&P and Fitch. Moody’s projects a growing federal deficit, reaching nearly 9 percent of GDP by 2035, fueled by rising interest payments and entitlement costs. The agency also warned that extending the 2017 tax cuts would exacerbate the deficit, highlighting political gridlock as a significant barrier to fiscal reform.
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Ray Dalio, Bridgewater founder, expressed deep concern over the global economic outlook, citing President Trump’s disruptive trade policies as a major destabilizing factor. He highlighted a shift from multilateralism to a more unilateral world order, increasing the risk of global conflict and recession. Dalio emphasized the interconnectedness of economic, political, and technological forces, warning that unchecked U.S. debt and trade disputes could trigger a financial crisis exceeding the severity of past events. He advocates for deficit reduction and a cooperative approach to international trade to mitigate these risks.
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During a flight to the Super Bowl, Donald Trump claimed that DOGE analysts discovered irregularities in U.S. Treasuries, suggesting the country might not be obligated to repay some debts. This statement directly contradicts the 14th Amendment, which explicitly prohibits questioning the validity of the public debt. While markets haven’t reacted significantly, the assertion is alarming given its potential to destabilize the financial system and its reliance on purported analyses from individuals with questionable expertise. The gravity of the situation remains uncertain pending further developments.
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John Q. Hosedrinker