Taiwan’s Warning on U.S. Debt and Trade Policies

TAIPEI (Reuters) – Taiwan’s central bank governor warned on Saturday that rapidly rising U.S. debt could be unfavorable for U.S. Treasuries and that U.S. President Donald Trump’s trade policies have made investors cautious.

Taiwan’s $593 billion in foreign exchange reserves are composed of over 80% U.S. Treasury bonds, according to the central bank. Earlier this month, it stated that Treasuries were ‘sound’ and still favored by investors, adding there are no worries about the dollar’s position as the leading international reserve currency.

Governor Yang Chin-long, in a speech posted on the central bank’s website, remarked that Trump’s criticisms of the U.S. Federal Reserve’s monetary policy have raised concerns about its independence.

> “In addition, Trump 2.0’s trade policy has made investors hesitant about holding U.S. Treasury bonds. Trump’s budget, the ‘One Big Beautiful Bill Act,’ may cause U.S. debt to expand too quickly, which is unfavorable to the outlook for U.S. sovereign debt,” he noted.

Yang emphasized that these factors significantly impact the international monetary system centered on the U.S. dollar and based on U.S. creditworthiness.

Trump’s sweeping tax-cut and spending bill is central to his domestic agenda. The bill is projected to increase the federal deficit by $2.8 trillion over the decade, despite boosting U.S. economic output, according to the nonpartisan Congressional Budget Office.

In his first weeks in office, Trump also announced sweeping tariffs on many countries, including Taiwan, but paused them for 90 days in April for negotiations. Yang commented that Trump hoped the tariffs could resolve the U.S. trade deficit.

> “However, the tariff policy not only fails to solve the structural problems but will also impact the U.S. economy and threaten to further affect the outlook for global trade and the economy.”