U.S. Net Investment Income Surplus Nears $0 as Higher Rates Swell $450 Billion Interest Deficit
Updated
Updated · Liberty Street Economics - · May 18
U.S. Net Investment Income Surplus Nears $0 as Higher Rates Swell $450 Billion Interest Deficit
1 articles · Updated · Liberty Street Economics - · May 18
$260 billion in 2019 has dwindled to near zero in 2024 and 2025, even as the U.S. still earns surpluses on foreign direct investment and portfolio equity.
$450 billion in net interest payments last year drove most of the erosion, with roughly $170 billion of the $240 billion increase since 2021 tied to post-pandemic rate increases.
$28 trillion in net foreign liabilities at end-2025—about 90% of GDP—has deepened the drag, after foreign holdings of U.S. assets climbed to $68.5 trillion versus $41 trillion in U.S. holdings abroad.
$16 trillion of deterioration in the net international investment position since 2019 reflects both $5.5 trillion in net asset sales to finance current account deficits and $10 trillion in adverse valuation changes.
$15 trillion in net interest-bearing liabilities now leaves the income balance more rate-sensitive: a 1-point rise in rates would cut net income by about $150 billion.
Is America's massive foreign debt a sign of global confidence in its economy, or a ticking time bomb?
With U.S. foreign debt at 90% of GDP, can new capital controls prevent a future economic crisis?
As central banks globally swap U.S. debt for gold, is the dollar's era as the ultimate safe-haven asset ending?