Taiwan has raised fresh concerns over the growing risks tied to US sovereign debt. Speaking on Saturday, Central Bank Governor Yang Chin-long pointed to America’s increasing borrowing and fiscal policies under President Donald Trump as a threat to long-standing confidence in US Treasury bonds. With Taiwan holding $593 billion in foreign reserves—over 80 percent of which are in Treasuries—the warning carries weight in global financial circles.
Trump policies trigger investor hesitation
Yang criticized Trump’s economic direction, highlighting the strain from expanded spending and trade measures. He cited Trump’s massive budget proposal, dubbed the “One Big Beautiful Bill Act,” which is projected to push the US federal deficit higher by $2.8 trillion over the next decade. According to the Congressional Budget Office, while short-term growth may occur, the long-term financial impact could erode trust in US debt markets.
The governor also warned that Trump’s approach to trade, including renewed tariffs, has caused concern among global investors. New tariffs have targeted several nations, including Taiwan, further straining relationships. Although a temporary 90-day pause was issued in April, Yang noted that this move does not address deeper trade imbalances. He said the policy threatens the US economy and could harm global economic stability.
Bond holdings show signs of decline
Taiwan’s concerns are not isolated. Recent data shows that foreign interest in US bonds is fading. In the past week alone, central banks and sovereign wealth funds reduced their holdings stored at the New York Federal Reserve by $17 billion. Since late March, the total decline has reached $48 billion, aligning with the start of Trump’s renewed trade actions.
Currently, foreign investors hold about 30 percent of the US Treasury market. Analysts have flagged a clear drop in demand, with experts like Torsten Sløk at Apollo and Katie Craig at BofA pointing to weakening foreign appetite for US debt. The Treasury Department is expected to release updated figures soon, which may show a deeper selloff.
Shift in reserve storage practices
Foreign banks typically use the New York Fed’s reverse repurchase facility to park cash after selling Treasuries. However, since March, foreign use of this facility has dropped by $15 billion. Altogether, US assets held by foreign institutions at the Fed have declined by $63 billion over two months.Taiwan’s central bank still regards US bonds as stable, but rising debt and aggressive policies may change that view.