The US will burn all its debt without paying it back.

As of 2025, the United States is implementing a global strategy that goes far beyond simple protectionism. Through tariffs, interest rate manipulation, and restructuring the global liquidity structure, the U.S. is effectively executing a new form of "silent default"—a way to offload the cost of its national debt onto the global system.

1. Tariffs Are Not Just Trade Policy

On the surface, the high tariffs imposed on major trade partners such as China, Europe, and South Korea are framed as efforts to protect domestic manufacturing and jobs. But beneath this rationale lies a much broader intention: to limit dollar inflows worldwide and disrupt global supply chains to reorganize trade around the U.S.

@k3-lab

Imposing tariffs means restricting imports, which ultimately blocks foreign access to U.S. dollars. In turn, countries try to overcome this by shifting their production bases into the U.S. market—resulting in a forced realignment of global supply chains in America's favor.

These tariffs hurt the profitability of foreign exporters, leading many nations to induce currency depreciation. As a result, the U.S. dollar maintains relative strength without needing to weaken itself, creating a global dollar shortage and further tightening the economic noose around the world.

2. Inflation and Rate Hikes: A Double-Edged Pressure

As tariffs cause weaker foreign currencies, those nations experience rising import costs, triggering inflation. The result is global inflationary pressure. The problem is, while the U.S. can afford to maintain or even raise interest rates, other countries face stagflation—rising prices combined with falling demand—making rate hikes politically and economically unviable.

If U.S. inflation rises in parallel, it’s likely the Fed will respond with another rate hike. This would trigger a return of global capital to the U.S. dollar, giving the U.S. a growth tailwind. But for countries suffering stagflation, the widening interest rate gap and capital flight would worsen local economic conditions.

In such a scenario, most countries would face a tough choice:

• Hike rates and destroy domestic demand

• Or inject liquidity (QE) to stimulate the economy despite high inflation

In either case, governments—especially those with limited FX reserves—would have little choice but to sell U.S. Treasuries to obtain dollars. This would push U.S. bond prices down—forcing foreign governments to realize losses by selling at depressed valuations due to America’s own rate hikes.

3. Bondholder Losses = U.S. Debt Relief

Although the U.S. repays its Treasuries in nominal dollar terms, the impact on foreign holders is very real. When foreign bondholders realize losses due to rising U.S. interest rates and currency depreciation, the U.S. indirectly reduces its own debt burden.

This is not an official default or restructuring. But the losses absorbed by foreign investors act as a form of debt forgiveness, allowing the U.S. to reduce its liabilities without paying a higher cost.

@k3-lab

The flow can be summarized as follows:

Tariffs → Global Inflation → U.S. Rate Hikes → Treasury Sell-off → Bondholder Losses → U.S. Debt Relief

4. The Dollar as a Tool of Global Reordering

This strategy is not simply about raising revenue through tariffs. It’s about reinforcing the dollar-centered global monetary order.

As the issuer of the world’s reserve currency and the rate-setter of last resort, the U.S. can pressure countries to sell assets and secure dollars. If this occurs under conditions favorable to the U.S., it gains both strategic and financial leverage:

• Debt reduction via bondholder losses

• Revenue through tariffs

• Industrial base revival

In turn, the U.S. strengthens itself while others grow weaker. This reinforces American dominance in the global financial system and lays the groundwork for a new monetary order—with the dollar at its center.

🔎 Conclusion: The U.S. Is Executing a Market-Based Debt Restructuring

The United States is linking tariffs, interest rates, currency policy, and asset valuations to execute a strategic form of market-based debt resolution. This strategy imposes losses on allies and trade partners in the short term but aims to re-establish a new, U.S.-led order in trade, credit, and monetary affairs over the long term.

Key variables going forward:

• U.S. Interest Rate Path: If inflation rises due to tariffs and the Fed hikes again, it will validate this strategy.

• China and Emerging Market Reactions: If they retaliate with counter-tariffs, it could destabilize the dollar-based system. U.S. must use differentiated tariffs to maintain alliances.

• Dollar Liquidity Stress: If the U.S. reduces its trade deficit, it would signal a turn away from global dollar supply—causing a crisis, but also reinforcing dollar dependency.

In sum, investors must view this transitional phase not merely as a cycle of tightening or trade friction but as a strategic global reset driven by America's effort to restructure its debt and reassert monetary dominance.

Some will see this crisis as opportunity. For others, it may feel like financial ruin. But one thing is clear: the time for clear, strategic decisions is now.