The US. holds the stronger hand in trade negotiations in virtually every category and, frustratingly, always has. We just never had a President who cared enough to do something. Now we do, and Japan's fairly shocking threat of dumping US Treasuries revealed that we may have one Achilles heel — our absurd debt levels and the financial subterfuge the Biden administration left America with after slithering out of office.
Japanese Finance Minister Katsunobu Kato said Friday that the country's massive $1.13 trillion in Treasury holdings were a "card on the table" in US trade talks. "It does exist as a card, but I think whether we choose to use it or not would be a separate decision," Kato said on a Japanese TV broadcast.
He did not say that Japan has plans to step up sales of its US government bonds to gain leverage in trade talks with President Trump's team, but that it is at least a card on the table that could be played. Japan has never made such a threat as this, even in this mild way, and it was no mistake that Kato did so, even when keeping it low-key.
After Japan, China has the second-largest holding of US bonds, at $785 billion, with the United Kingdom right behind them at $750 billion.
But Japan alone, alone in unison with others, is a real threat. If they started seriously dumping US Treasuries onto the market, that would spike interest rates at a time when we are being forced to roll over large portions of our abominable debt load because the Biden administration irresponsibly—as usual—rolled over trillions of dollars to short government notes to get a slightly lower interest rate. I bet rates would be lower in the future.
Biden's skullduggery to minimize and hide its reprehensible spending levels, which are turning out to be even larger than the disgraceful level it was officially at, left the Trump administration with a financial burden that would be challenging to handle, even without trying to fix our noxious trade deals.
That is compounded by bipartisan, unrestrained spending beyond our means for generations that seems to care little about what our children and grandchildren will face. DOGE can only rectify so much of that.
So the Trump administration sits with a $36 trillion debt, an astounding $9.2 trillion of which will need refinancing by the end of this year. Without any spike in interest rates, payment on debt interest alone will pass $1 trillion next year. Currently, interest on the national debt is more than the entire defense budget, Medicare, or Medicaid. Only Social Security sucks up more tax dollars. Each American's share of the interest payments this year will be about $3,400.
A spike in interest rates would cost tens to perhaps hundreds of billions of dollars, depending on how much the rates increased, which could completely wipe out all of DOGE's savings.
Japan knows this, as do other nations. It may only be Congress that is unaware. Now, it is not cost-free for those countries. But it would be most painful for us. And in negotiations, you often take any leverage point you can, even if it is a bluff. That Japan, of all our solid and cautious allies, with the largest holding of our debt, would open the door to this is a dangerous signal to others. It could be an inflection point in the saga of trade negotiations.
And it is only available to other nations because of our despicable, profligate overspending for decades, which has left America financially vulnerable.
Rod Thomson is a former daily newspaper reporter and columnist, Salem radio host and ABC TV commentator, and current Founder of The Thomson Group, a Florida-based political consulting firm. He has eight children, seven grandchildren, and a rapacious hunger to fight for America for them. Follow him on Twitter at @Rod_Thomson. Email him at [email protected].
