Since US President Donald Trump returned to the White House earlier this year, the direction of the US’ national policy has shifted from a focus on globalization and energy transition to a comprehensive bolstering of national security, supply chain autonomy and technological resilience. The Trump administration has also drastically reduced government spending, cut public services, launched trade negotiations and imposed harsh tariffs on imports. While the inherently unpredictable US president has often kept everyone guessing about his next move, his “America First” and “Make America Great Again” policies have remained the same since day one.
A clue to Trump’s policy lies in the country’s ballooning debt burden. The US debt burden — or debt-to-GDP ratio — has steadily climbed over the past few years after surpassing 100 percent in 2013.
Trading Economics global macro models forecast that the ratio would climb further this year from 123 percent last year, indicating that the US government would face more challenges in repaying the debt.
The financial report released by the US Department of the Treasury in January also revealed the unsustainable state of the US’ finances, with people worried about employment, investments and the country’s long-term economic growth, and rising interest payments contributing to the strained government budget.
Based on the report, the US’ total liabilities in fiscal 2024 were US$45.5 trillion, of which US$28.3 trillion were federal debt and interest payables, and US$15 billion went to federal employee and veteran benefits payables. The US’ total assets amount to US$5.7 trillion, which means it was in a negative net position of US$39.9 trillion, higher than the country’s nominal GDP of US$28.83 trillion that year.
Moreover, the US’ budget deficit increased by US$137.6 billion, or 8.1 percent year-on-year, to US$1.8 trillion. As debt levels grew, the government spent more, given the rising interest rates.
Interest costs rose by US$231.1 billion from the previous fiscal year, reaching US$881.7 billion, accounting for about 12 percent of the US’ total spending, the report showed.
While not entirely unexpected, the report provided the Trump administration with justification for drastic spending cuts, trade negotiations, and to put more pressure on the US Federal Reserve to cut rates quickly and significantly.
Despite mounting debt, the risk of a default on US Treasury bonds remains low. However, the US’ fiscal problems could one day cripple its government, and impact its domestic economy, social security and external relations. As the country’s debt is growing faster than its GDP, it means its fiscal path is unsustainable. If its revenue and spending patterns do not change, US debt would continue to grow and eventually significantly impact its economy.
Trump’s policy might not be able to reverse the trend of budget deficits and rising debt, but it at least offers possibilities of change. Ten months into his presidency, Trump has established a framework for national development that aims to not only lower national debt, but also reduce external dependence, develop domestic supply chains, and rebuild US defense and deterrence capabilities.
As Taiwan continues to work on a trade deal with the US to reduce the current 20 percent tariff imposed on Taiwanese goods, and avoid tariffs for the nation’s semiconductor and information technology products, understanding Trump’s strategic thinking is important.
It is clear Trump’s focus is economic security. Since Taiwan’s strength is in the semiconductor industry and its years of experience in building more resilient supply chains, establishing a stronger tech supply chain partnership aligns with Trump’s national development policy, and benefits Taiwan and the US.
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