U.S. Debt Tops $39 Trillion, Lifting 2 International ETFs as Debt Exceeds 100% of GDP
Updated
Updated · The Globe and Mail · May 18
U.S. Debt Tops $39 Trillion, Lifting 2 International ETFs as Debt Exceeds 100% of GDP
2 articles · Updated · The Globe and Mail · May 18
U.S. federal debt held by the public stayed above 100% of GDP through March 31—the first sustained breach since 1946—while total national debt climbed past $39 trillion and annual interest costs topped $1 trillion.
Q1 2026 GDP was nearly $32 trillion, and the gap has widened as tax cuts, higher government spending, rising borrowing costs, and aging-driven Social Security and Medicare outlays push debt growth faster than revenue.
VXUS and IXUS have emerged as beneficiaries of the "Sell America" trade, each gaining about 25% over the past year and outperforming the S&P 500 as investors sought equity exposure outside the United States.
Fund flows reinforce that shift: VXUS drew more than $10 billion of institutional inflows over 12 months, while IXUS took in over $1 billion and both funds kept short interest relatively low.
The debt overhang has already fed U.S. credit-rating cuts—most recently Moody's 2025 downgrade to Aa1—and CBO projections show federal spending rising to 27.9% of GDP by 2056 versus 18.8% for revenue.
Is America’s record debt signaling a fundamental shift in the global economic order or a manageable challenge for its economy?
As U.S. debt soars, should investors hedge with global funds or trust Wall Street's optimistic forecasts for American stocks?
Do international ETFs truly offer a safe haven, or do they carry hidden risks from U.S.-China geopolitical tensions?
America's $39 Trillion Debt: Fiscal Crisis, Investor Flight, and the Global Repercussions in 2026
Overview
The United States is facing a new fiscal reality as its national debt nears $39 trillion, reaching 100% of GDP. Despite this, Washington continues to spend, raising concerns about America’s creditworthiness. Recent credit rating downgrades have highlighted the risks, as escalating debt threatens the prosperity of current and future generations. Investor confidence is shifting, with many moving capital to international markets. The growing debt burden also limits policy options and increases the risk of a fiscal crisis, making it urgent for lawmakers to address structural reforms to ensure long-term economic stability.