Taiwan Central Bank Flags Concerns Over U.S. Debt, Trade Policies

On June 21, Taiwan’s central bank governor raised concerns about the U.S. economy and rising U.S. debt. Yang Chin-long warned that President Donald Trump’s trade agenda and budget bill could damage confidence in U.S. Treasuries. He also questioned the long-term strength of the U.S. dollar and the Federal Reserve’s independence. Taiwan holds $593 billion in foreign exchange reserves. Over 80% of this is invested in U.S. Treasury bonds. While the central bank still considers Treasuries “sound,” it notes growing risks. These remarks come as Washington faces pressure over its fiscal and trade policies.

Trump’s Budget May Fuel U.S. Debt Worries

Yang said Trump’s new budget plan, the “One Big Beautiful Bill Act,” could sharply raise U.S. debt. He warned that these changes won’t appeal to long-term U.S. Treasury bonds. The Congressional Budget Office (CBO) mentioned that this bill adds $2.8 trillion to the federal deficit within a decade. This plan also includes increased tax cuts. 

It may boost economic output in the short term, but the debt risk alarms foreign investors. “Trump 2.0’s trade policy has made investors hesitant,” Yang added. He said U.S. creditworthiness remains central to the global monetary system, but it now faces serious questions. The bill is a key part of Trump’s domestic agenda. However, it could weaken trust in the U.S. economy. Yang’s comments reflect growing international unease over the sharp rise in U.S. debt.

U.S. Economy Faces Global Trade Risks

Yang criticized Trump’s tariff strategy, which affects global trade flows. In early 2025, Trump launched sweeping tariffs on major partners, including Taiwan. The administration paused the measures for 90 days in April to hold talks. Trump aimed to cut the U.S. trade deficit through this move. Yang argued that tariffs will not fix the U.S. economy’s structural issues. Instead, he said, they may hurt global trade and investment. Yang said that the tariff policy doesn’t help to solve the problems, and above all, it impacts the U.S. debt rise. Investors now view Trump’s return to power as a cause for caution. Taiwan’s central bank remains closely tied to U.S. fiscal decisions due to its large bond holdings.

Fed Independence Draws Fresh Scrutiny

Trump repeatedly criticized the Fed’s monetary policy. Yang also shared concerns about the Federal Reserve’s independence. He noted, “This has had a significant impact on the international monetary system.” Fed Governor Christopher Waller added new fuel to the debate on Friday. He said a rate cut could happen as early as July. His dovish tone triggered a brief market rally at the open. But gains faded later in the day. Waller is now seen as a top candidate to lead the Fed next year. Next week, Fed Chairman Jerome Powell appears in front of Congress. Traders expect Powell to signal a data-driven approach and no immediate rate cuts. 

Market Updates Amid U.S. Debt Rise

While broader markets stayed cautious, some individual stocks soared. The S&P 500 index fell 0.22% to 5,967.84 points. This marked the third consecutive trading day where the index briefly surged above 6,000 points. The Nasdaq composite Index dropped to 19,447.41 points, reflecting a 0.51% loss. Dow Jones Industrial Average rose to 42,206.82 points, mirroring a 0.08% growth. This entire week, the S&P 500 index dipped 0.15%. Concerns over the U.S. economy and U.S. debt dominate investor thinking. Taiwan’s central bank continues to monitor the outlook closely. It holds a major stake in Treasuries and cannot ignore shifts in U.S. policy.