Taiwan Central Bank Warns of U.S. Debt Risks to Global Economy

On June 21, the governor of China Taiwan’s central bank, Yang Chin-long, voiced significant concerns over the escalating U.S. debt and its potential impact on U.S. Treasuries. Yang emphasized that the rising U.S. debt, combined with President Donald Trump’s trade policies, could erode confidence in U.S. Treasuries and the global monetary system. The central bank holds over 80% of its $593 billion in foreign exchange reserves in U.S. Treasury bonds, making it particularly vulnerable to changes in U.S. fiscal policy.

Yang’s comments come at a time when the U.S. is under increasing pressure due to its fiscal and trade policies. He cautioned that Trump’s new budget plan, the “One Big Beautiful Bill Act,” could substantially increase U.S. debt, adding $2.8 trillion to the federal deficit over a decade. This plan includes increased tax cuts, which, while potentially boosting short-term economic output, raises long-term debt risks that could alarm foreign investors. Yang also criticized Trump’s tariff strategy, arguing that it will not address the structural issues of the U.S. economy but could instead harm global trade and investment.

Yang also expressed concerns about the independence of the Federal Reserve. He noted that repeated criticisms from Trump about the Fed’s monetary policy have had a significant impact on the international monetary system. This sentiment was echoed by Fed Governor Christopher Waller, who suggested that a rate cut could occur as early as July. However, Yang’s comments reflect a broader international unease over the rapid rise in U.S. debt and the potential implications for global financial stability.

Investors are closely monitoring the situation, with many viewing Trump’s return to power as a cause for caution. The central bank’s large holdings in U.S. Treasuries mean it is particularly vulnerable to any shifts in U.S. policy. As the U.S. economy faces global trade risks and the Fed’s independence comes under scrutiny, China Taiwan’s central bank remains vigilant, closely monitoring the outlook for U.S. Treasuries and the broader economic landscape.