Annie Dufour (@anniedufour99) lays it out in laymans terms:
“Long-term debt is the single greatest threat to
USA’s national security.”
Canada is now the 5th largest foreign holder of U.S. debt.
Yesterday I explained how America’s $40 trillion debt and the bond market panic may have forced Trump to blink on tariffs — and how Mark Carney holds a quiet weapon.
Today the full picture:
Japan: $1.12T
UK: $940B
China: $633B
Belgium: $483B
Canada: $460B ← 5th largest foreign holder
The U.S. is more vulnerable than most people realize. Here’s the deeper breakdown
How the US debt problem has empowered other countries, like Canada.
“Long-term debt is the single greatest threat to our national security.”
— Coalition for Fiscal and National Security (May 2016)
Ten years ago, this statement emerged from a report by this committee, composed of distinguished American Republicans and Democrats such as Henry Paulson, James Baker, and Madeleine Albright, at a time when the US debt situation was not as critical as it is today.
Nothing illustrates this better than this comparison.
In 1994, Canada was experiencing a fiscal and debt crisis, to the point that the Wall Street Journal described Canada as “an honorary member of the third world.”
Its ratios at the time were as follows:
Canada 1994:
Debt/GDP: 40%
Deficit/GDP: 5 %
US projections for 2026:
United States 2026:
Debt/GDP: 125%
Deficit/GDP: 7 %
This is clear evidence of the problematic nature—to say the least—of US debt. Let's examine how it weakens US national security and empowers foreign actors, including countries like Canada.
The more US debt increases and the more it slips out of American hands, the less control they have over their own destiny and that of the financial markets.
We saw a perfect example of this in two ways this week.
1 – THE CASE OF JAPAN
The US Treasury had to intervene with its main creditor, Japan, whose currency, the Yen, was on the verge of collapse and, to save it, could have massively liquidated US debt. Wanting to prevent this at all costs, Scott Bessent of the US Treasury bought massive quantities of Yen.
If Japan had massively sold its US debt, the law of supply and demand would have played a huge role, causing bond prices to fall and bond yields to rise, ultimately leading to higher interest rates for all Americans. And the increase would have been catastrophic.
2 – 30-YEAR BOND YIELDS HIT 20-YEAR HIGH
The U.S. Treasury carried out a massive buyback of long-term bonds—issuing short-term debt in exchange—in an effort to cool down 30-year bond yields. This failed to reassure the markets, which remain volatile and who understood what actually happened: the United States swapped the equivalent of a long-term, fixed-rate mortgage for a short-term, variable-rate mortgage, thereby exposing itself far more to market whims, interest rate shifts, inflation, and so on.
“High debt not only crowds out resources that strengthen our security, but it also narrows our tools for dealing with unfriendly nations, leaves our economy more vulnerable to actions of other countries, and weakens our global standing and prestige.”
— Source: Committee for a Responsible Federal Budget, 2022
First of all, who holds this U.S. debt abroad—those other countries mentioned above whose actions can influence the United States?
Japan: $1.117T
UK: $939.9B
China: $633.4B
Belgium: $482.5B
Canada: $459.6B
And yes, Canada comes in at fifth place—what a surprise! In an article yesterday, I explained how Canada had significantly increased its holdings of U.S. debt and how this could offer the country leverage and protection.
“The Russian invasion of Ukraine has highlighted how the global marketplace for sovereign debt has created new vulnerabilities, as countries around the world have frozen Russia’s access to sovereign debt markets. While it is hard to imagine any comparable situation with the United States, this shows how foreign actors can leverage ownership of debt against one another. On a much smaller scale, China may be able to leverage its holdings to create problems in the U.S. Treasury markets.” (source, ibid.)
Since then, Trump has come to power, and the scenario described seems less difficult to imagine. Imperialistic—even conqueror-like—Trump’s America is alienating ally after ally. If this aggressive trend continues, certain allies—let alone adversaries—might be tempted (not maybe to freeze assets, as was done with the Russians) , but to use their sovereign debt leverage to manipulate the U.S.
And you saw from this list that Canada is one of those countries that has accumulated enough U.S. debt to annoy the Yankees...
Now and in the future, since that debt will only keep ballooning.
For the Trump administration has no intention of seriously addressing the problems:
"There's nothing magic about the $40 trillionnumber. And we can grow our way out of that"
— Scott Bessent, U.S. Treasury advisor. ( see video )
A solution that has drawn derision from many experts...
"To genuinely grow your way out of this level of leverage, you would need sustained productivity spikes of 3% or 4%—levels we haven't seen since the post-WWII boom. Relying on that as a policy framework is a massive, dangerous gamble."
— Jason Furman, former Chairman of the Council of Economic Advisers.
Or, as Nobel Prize-winning economist Paul Krugman put it simply:
"The math simply does not work."
What's concerning to me is that there seems to be nobody on the Republican side willing to stand up and take a hard detour and in the case of the very few who have the MAGA electorate vote them out of office the first chance they get.
Kinda scary ...
USA’s national security.” 
Canada is now the 5th largest foreign holder of U.S. debt.
Japan: $1.12T
UK: $940B 
China: $633B 
Belgium: $483B 