Japan and China - the countries that hold the most US government bonds

The United States owes foreign investors $8.5 trillion in national debt - nearly a quarter of the total debt, according to a visualcapitalist.com analysis that highlights the largest foreign holders of U.S. government securities.

U.S. debt increases when the government spends more than it collects in taxes and other revenues. To cover this shortfall, the U.S. Treasury issues Treasuries and bonds. These securities are highly liquid, widely used by central banks as reserves and favored by investors during times of market volatility. The national debt is the total of the government's accumulated budget deficits, minus any surpluses, the source said.

The U.S. national debt has topped $34 trillion and, according to projections by the Congressional Budget Office, could reach $50 trillion within the next decade.

US Treasury Department figures for December 2024 show that Japan is the largest foreign holder of US debt, with over a trillion dollars, followed by China ($759 billion) and the UK ($723 billion). Next are Luxembourg ($424 billion), Cayman Islands ($419 billion), Canada ($379 billion), Belgium ($375 billion), Ireland ($336 billion), France ($332 billion), Switzerland ($289 billion), Taiwan ($282 billion), Hong Kong ($255 billion), Singapore ($249 billion), India ($219 billion), Brazil ($202 billion), Norway ($158 billion), Saudi Arabia ($138 billion), South Korea ($125 billion), Mexico ($103 billion), Germany ($97 billion), rest of the world ($1.6 trillion).

• Should the US pay its debt?

Technically, the US must pay interest on its debt and the principal on government bonds that mature, according to the cited source. However, as Business Insider writes, it is rare for countries to pay off their debt in full. For example, the UK still has debts from the Napoleonic Wars (1799 - 1815).

More important than total debt is its ratio to GDP, more precisely how much the country's resources can cover the interest and principal on that debt. The ratio of US debt to GDP was about 98% at the end of 2024, below the critical threshold of 100%, which some economists consider a warning sign.

• Debt under Trump

One way to limit debt growth is to reduce federal spending. To achieve this, the new Trump administration established the Department of Government Efficiency (DOGE). Under Elon Musk's leadership, DOGE has already taken a hard look at several federal agencies. The department's goal is to identify and eliminate unnecessary spending, with Musk estimating a potential savings of $2 trillion from government "waste."