How US debt has become a global burden

Editor's note: Liu Qiang is a research fellow at the Academy of Financial Research, School of Economics of Zhejiang University of China. The article reflects the author's opinions and not necessarily the views of CGTN.

Data from the US Treasury Department shows that as of mid-August, the total US federal debt had reached $40 trillion — roughly $10 trillion more than America's annual GDP, or about $116,000 for every American. Debt held by the public has now blown past 100% of GDP, with the Congressional Budget Office projecting that it will hit 120% by 2036. Behind these staggering numbers lies a relentless debt expansion whose collateral damage is increasingly exported to the rest of the world. The faster this debt snowball rolls, the further its shockwaves travel.

The structural engine of runaway debt

America's debt snowball is not just growing larger; it is gathering speed. The leap from $39 trillion to $40 trillion took less than five months, with debt expanding over the past year at an average pace of $7.9 billion a day. While cyclical pressures played a role, the core drivers are deeply structural: Pandemic-era stimulus hangovers, non-negotiable mandatory spending on social security and medicare, and an entrenched political habit of slashing taxes without trimming expenditures. Deficit spending has shifted from a crisis tool into a permanent political feature. With the federal deficit projected at $1.9 trillion for fiscal year 2026, the national debt is expanding by over $2 trillion a year — nearly double the growth rate of the broader economy. Worse, the political machinery lacks an internal brake: As long as borrowing remains far less painful at the ballot box than taxing or spending cuts, Washington will continue using deficit finance as an easy escape from hard choices.

Interest outlays overtake defense

The domestic consequences are already surfacing. Today, roughly $1 out of every $5 in federal tax revenue goes directly toward debt service. In the first nine months of fiscal 2026 alone, net interest outlays mounted to $827 billion — eclipsing the entire defense budget over the same period. Net interest has climbed to 3.3% of GDP and is on track to hit 4.6% by 2036. A vicious cycle of "higher debt, heavier interest, more borrowing" is swiftly taking shape. With the 30-year Treasury yield recently touching 5.327% — its highest level since 2007 — financial markets are openly pricing in Washington's fiscal recklessness. As interest obligations eat up an expanding share of the federal budget, critical investments in infrastructure, education, and research are being quietly crowded out, mortgaging America's long-term productivity for short-term fiscal convenience.

Exporting high borrowing costs

Yet, America is not bearing these costs in isolation. Because US Treasury yields serve as the ultimate anchor for global asset pricing, every uptick in yields reverberates worldwide. An endless wave of new Treasury supply keeps lifting term premiums, pushing up borrowing costs for foreign governments, corporations, and households alike. At the same time, the "suction effect" of high-yielding US debt pulls vital capital away from global markets and back to America. Emerging economies face the brunt of this shift. As foreign-currency debt burdens swell, business investment and domestic consumption in developing nations are taking a synchronized hit. Mediated by the dollar's central position in global finance, Washington is essentially transferring the price of its budget deficits onto the global public: Foreign economies are forced to pay more for their own debt so the US can keep borrowing at scale.

Institutional capital flees, fast money moves in

The second transmission channel is rising volatility and an erosion of systemic trust. Long-term, stabilizing holders — such as foreign central banks and sovereign wealth funds — have gradually stepped back from Treasuries. In their place, highly leveraged hedge funds and short-term speculative capital have become the market's marginal buyers. As a result, US Treasuries are transitioning from an anchor of global stability into an amplifier of market swings, where any sharp economic or policy shift could trigger rapid, concentrated fire sales by leveraged players. This institutional migration reflects a deeper loss of confidence. Over the past decade, the dollar's share of global foreign exchange reserves has eroded from roughly 70%to 57%. Meanwhile, gold's share of official reserves has surged to 27%, surpassing Treasuries as the world's primary reserve asset. The market is voting with its capital. For decades, the unrivaled depth and liquidity of the Treasury market anchored the dollar's global dominance; a market increasingly reliant on "fast money" can no longer guarantee that stability.

With some analysts estimating that US debt could reach $70 trillion within the next decade and push annual interest past $2.4 trillion, the world is unlikely to face a single, explosive debt crisis. Instead, it faces a long, chronic fiscal drag — an ongoing extraction mechanism through which the dollar system exports America's imbalances to the rest of the globe. Forty trillion dollars is not a temporary peak; it is an alarm bell. For foreign economies, building risk buffers and diversifying reserves and financing channels is no longer a precautionary luxury — it is a matter of immediate survival. The question is no longer if America's debt problem will become the world's problem. Through the dollar system, it already is.