- US national debt has surpassed $40 trillion amid rising borrowing costs
- President Trump calls for lower interest rates, blaming Fed for political motives
- In comparison, China's debt stands at $18.7 trillion
The US national debt has crossed a number that is difficult to ignore -- $40 trillion.
Significantly, the country's debt has soared at a time when its cost of borrowing remains elevated. Besides, long-term US Treasury yields have also climbed to levels not seen in decades, adding to the government's interest burden.
Against this backdrop, US President Donald Trump has once again argued that America should be paying much less to borrow. He said the US should be paying the "lowest interest rate, by far" on its bonds. "Lower borrowing costs could save the government a huge amount of money," said Trump.
Attacking the US Federal Reserve, the US President accused Fed officials of having political motives. However, Trump said Fed Chairman Kevin Warsh, whom he nominated to the top position earlier this year, is doing a "great job".
Trump Wants Lower Interest Costs
If the US can borrow at lower rates, its annual interest bill would fall sharply. This could free up money for other government spending and help ease pressure on the federal budget.
But there is a catch. The US does not decide Treasury yields on its own. Investors do. When investors demand higher returns to hold long-term US government bonds, America's borrowing costs rise. And with the debt pile getting bigger, even a small increase in borrowing costs can translate into a massive increase in interest payments.
Less than a week ago, US 30-year Treasury yields recently touched 5.22 per cent, the highest level since 2001. The government is already spending more on interest payments than on national defence.
$40 Trillion Debt: Is It Really A Crisis?
A $40 trillion debt figure sounds alarming. But the size of the debt alone does not determine whether a country is in trouble.
The US has a huge economy. More importantly, the dollar remains the world's dominant reserve currency. This gives Washington far greater borrowing capacity than most countries.
Gaurav Garg, Head - Research, Lemonn, said the $40 trillion figure needs to be viewed in context. "$40 trillion is a huge number, but debt itself is not necessarily the problem," Garg said.
According to him, the US economy is roughly $30 trillion in size and the dollar's reserve-currency status gives America more room to borrow. "Debt can be productive when it funds infrastructure, technology and investments that create future growth," Garg said.
The bigger worry, he added, is the cost of carrying that debt. The US is already spending close to $1 trillion a year on interest, Garg pointed out. "Markets can live with high debt; the real risk begins when borrowing increasingly pays for yesterday's bills rather than tomorrow's growth," he said.
Echoing a similar view, Vivek Iyer, Partner and Financial Services Risk Advisory Leader, Grant Thornton Bharat, said, "The absolute value of debt is never a good metric, but the trajectory of debt growth is the more appropriate measure."
He added, "US debt has doubled over the last decade from roughly 19 trillion to 40 trillion and that reflects the rising pressure of interest burden which has a tendency to crowd out other relevant spends. In fact, the interest burden we believe is higher that the defence spends of the US. Having said that, given that dollar is the global reserve currency and it borrows in its own currency, the debt levels are a signal of structural deficiency rather an imminent crisis."
US Debt Vs China And India
The US is not the only major economy carrying a large debt burden. China's debt is also enormous, although comparisons can be tricky because different countries use different definitions of government and total debt.
China's 2026 budget, for instance, puts its central government treasury debt limit at 48.55 trillion yuan, while local government debt limits are also substantial.
India's debt is much smaller in dollar terms. The Centre's outstanding debt and other liabilities were estimated at about Rs 200.53 lakh crore at the end of March 2026. The government's debt-to-GDP ratio was 56.1 per cent.
