The Trump administration is pressuring trading partners to Buy American — American energy, defense and agricultural products, that is, and as The Wall Street Journal reports, many anxious global leaders, eager to placate the commander in chief and avoid a prolonged trade war, have voiced support for the idea.
However, just as foreign leaders are saying they’ll buy American goods and services, foreign investors, from Japanese pensioners to European mutual funds to state actors are Selling American — specifically American stocks, corporate debt and, worryingly, the treasury bonds America relies on to finance trillions in government spending.
Ross Perot gained political fame (or infamy, depending on who you ask) in the 1990s by arguing that the flow of factory jobs from the Midwest to Mexico from NAFTA would cause a “giant sucking sound going south.” We’re hearing a new sucking sound, but this time it’s capital, rather than jobs, that’s whooshing out of our national doors.
Since the beginning of the year, the US dollar has weakened against nearly every major currency, falling more than 10% against the Euro and Japanese Yen, and more than 8% against the British pound. And while US stock markets are reeling under pressure from Trump’s tariffs, European and British markets are up.
Some fear the damage from tariffs to American business, US financial markets and even the dollar itself could be long lasting. “Global trust and reliance on the dollar was built up over a half century or more,” says Barry Eichengreen, an economist and professor at the University of Berkeley, adding “But it can be lost in the blink of an eye.”
Predictions that current policy will lead America down the road to ruin are probably overblown. But this dollar angst raises a pressing and real concern that the US could run out of buyers for its government debt as traditional investors shun treasuries along with other US assets.
In a worst case scenario, China may even dump US debt intentionally to retaliate for tariffs, sending rates higher, impacting everything from car loans to mortgage payments. Treasury Secretary Scott Bessent tried to calm markets of these worries, saying, “If a foreign rival were weaponizing the US government bond market or attempting to destabilize it for political gain, I am sure that we would do something.”
So, the US needs to fund key government spending at reasonable rates of interest, but legacy buyers may not line up as eagerly in the future to buy the debt. Now what?
The good news is that a new buyer of US treasuries is emerging, made possible by the technology behind cryptocurrencies like Bitcoin.
Blockchain-based stablecoins are now the seventh largest buyer of US government debt, exceeding Germany, Australia and other big countries. And they’re growing quickly — surpassing $200 billion in size this year and nearly $250 billion today.
Because stablecoins are fully backed 1:1 by dollar reserves, typically US government debt, they are a persistent and growing buyer of new treasury issuances. Increasingly, government leaders see their potential. In a June 2024 opinion piece in The Wall Street Journal, former Speaker of the House Paul Ryan said, “Dollar-backed stablecoins are becoming an important net purchaser of US government debt.”
To be sure, stablecoins are still a small piece of the enormous treasury market. But the trend suggests that stablecoins will continue to grow, perhaps capturing as much as 5%-10% share of the global money supply, or $5-$10 trillion, over the next decade.
Jeremy Allaire, CEO of Circle, the largest American stablecoin issuer, said that the stablecoin market could reach $3 trillion by 2030. For context, a $3 trillion stablecoin market would soak up more US debt than China, Japan or the UK, the three largest current owners of US government debt, combined.
The US has benefited enormously from the US dollar being the global reserve currency. Despite accounting for about 25% of the world’s GDP, the greenback is involved in most of global trade.
At White House Crypto Summit in February, Scott Bessent said, “We are going to keep the US [dollar] the dominant reserve currency in the world, and we will use stablecoins to do that.” China and the rest of the world may be closing a door on America’s dollar and on an old regime where the US relied on foreign governments to buy its debt. Stablecoins could be opening a window to its future.
Alex Tapscott is the author of “Web3: Charting the Internet’s Next Economic and Cultural Frontier” and managing director of the Digital Asset Group, a division of Ninepoint Partners LP.