Taiwan Warns US Debt Surge and Trade Policies Erode Confidence in Treasury Bonds
Taiwan’s central bank governor Yang Chin-long cautioned that the US government’s rising budget deficit, fueled by President Trump’s tax cuts and tariff policies, is undermining global trust in US Treasury bonds. Taiwan holds over 80% of its $593 billion reserves in Treasuries. Foreign holdings at the New York Fed have fallen by $63 billion since March, signaling declining demand. Yang warned that a projected $2.8 trillion deficit increase over the next decade and continued trade tensions threaten the dollar’s reserve status and financial market stability. While Taiwan still deems US bonds “sound,” it urged Washington to rein in debt growth and trade disputes to sustain confidence.
Neutral
Although weakening confidence in US Treasury bonds could spur investors to seek alternative assets, including cryptocurrencies, the immediate impact on crypto trading is unclear. Historical precedents—such as debt ceiling standoffs—have led to short-term dollar volatility but mixed crypto responses. In the short term, treasury market instability may increase volatility in forex and bond yields, with uncertain spill-over into crypto. Long term, sustained doubts about the dollar could strengthen crypto’s narrative as an alternative store of value, yet this depends on evolving regulatory and macro conditions.