The United States' reliance on foreign creditors has again come under scrutiny as tensions rise between the Trump administration and various nations. Specifically, the $9 trillion in U.S. debt held by foreign entities is being viewed by some as a point of vulnerability, particularly as President Trump's policies and pronouncements unsettle global investors.

Ray Dalio, the founder of Bridgewater Associates, recently highlighted this issue, stating that the foreign-held debt represents an "enormous vulnerability" for the U.S.. His warning coincided with a period of market turbulence triggered by Trump's actions, including escalating demands for Greenland, which led to a sell-off in stocks and bonds.

Adding to the unease, an executive at Denmark's largest pension plan announced the sale of its $100 million in U.S. Treasury bonds following Trump's Greenland pursuit. While the executive insisted the move wasn't political, Dalio suggested that holding U.S. debt could simply become "unpopular".

This isn't the first time the U.S.'s dependence on foreign bondholders has been perceived as a weakness. A similar scenario played out in 2007 when Russia reportedly suggested to Chinese officials that they simultaneously dump their holdings of Fannie Mae bonds. More recently, PIMCO, a bond investment giant, signaled a shift away from U.S. assets due to Trump's "unpredictable" policies, and General Atlantic reported holding more assets outside the U.S. than within for the first time in its 45-year history.

However, some analysts believe that the concerns may be overblown. Despite the recent anxieties, data through September 2025 indicated that foreign net purchases of Treasuries actually increased, and during Trump's first term, foreign holdings of Treasuries rose from $5.95 trillion to $7.12 trillion. The U.S. Treasury market's sheer size, offering better liquidity and lower transaction costs, makes it difficult for investors to simply abandon U.S. bonds.

Still, the possibility of foreign investors reducing their exposure to U.S. debt cannot be entirely dismissed. About 30% of foreign owners of Treasury bonds are central banks and sovereign wealth funds, and many reserve managers have hinted at reducing their U.S. bond holdings in the coming years. A major shift in global trade away from the U.S. could also dampen foreign demand for U.S. debt.

The potential consequences of a large-scale sell-off could be significant. It would likely disrupt financial markets globally, impacting not only the U.S. but also European banks and the global economy. A "mega-flash sale" of U.S. Treasuries would also cause those assets to lose value.

Despite the potential risks, the U.S. government has projected confidence. Treasury Secretary Scott Bessent downplayed the significance of Denmark's investment in U.S. Treasury bonds, stating that it was "irrelevant".

For now, the situation remains fluid. While some investors are proceeding with caution due to geopolitical and macroeconomic uncertainty, others believe the industry has largely factored in these risks. It remains to be seen whether the recent market jitters are a temporary blip or the start of a more significant trend.