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Are global investors withdrawing from U.S. holdings? This query has been posed by many analysts since American President Donald Trump implemented trade duties last year — and assailed former allies and adversaries without distinction.
And recent signs of apprehension have appeared: a fresh poll from Bank of America indicates that market confidence in the dollar is declining; a Danish retirement fund is avoiding government bonds; and certain investors are moving towards non-U.S. and non-technology stocks due to such a heavy focus — and excessive enthusiasm — for technology within U.S. market benchmarks.
However, this week, fresh information has surfaced that provides a significant caveat: the U.S. Treasury announced that foreign investors acquired a net $1.55tn in long-term American financial holdings in 2025, representing an increase — indeed, an increase — from a net $1.18tn in 2024. Out of this total, $442.7bn consisted of Treasury bills and bonds, and $658.5bn comprised stocks.
What implications does this hold? One clear observation is that it demonstrates that anxieties about a “sell America” capital exodus are presently vastly exaggerated, regardless of global opinions on Trump.
Nevertheless, a second, more enduring concern also warrants discussion: the United States’ investment standing with the global community. As technology shares have surged in recent years, the fundamental dynamics of the financial framework have altered in surprising fashions. And while this significant pattern has mostly passed unnoticed, it prompts the inquiry: what could occur if these movements reverse, down the line?
The central problem is encapsulated in the data for the so-called net international investment position (NIIP), which “quantifies the disparity between U.S.-held foreign assets and foreign-held U.S. assets”, as per a useful introductory guide from the Federal Reserve Bank of St Louis.
Organizations like the Brookings Institution meticulously monitor these movements. However, individuals outside economics (such as Trump) typically disregard them, as the NIIP is inherently conceptual. Certain economists, including Brad Setser, also believe it is skewed by corporate tax evasion tactics.
Analysts at the Bank for International Settlements (Stefan Avdjiev, Tsvetelina Nenova and Marjorie Santos) are currently collaborating with Kristin Forbes of MIT to simulate the NIIP with greater precision — yielding astonishing findings.
Consider a recent academic document by Forbes. It reveals that two decades prior, the U.S.’s NIIP was “merely” comparable to 11 percent of its GDP, expressed as a negative figure. This implies that the worth of American assets owned by foreign entities somewhat surpassed the holdings of non-U.S. assets by Americans, after accounting for trade and budgetary shortfalls, disposals of U.S. debt, and yields on U.S. and non-U.S. assets.
However, the latest statistics (late 2024) indicate this negative NIIP has surged to match 91 percent of U.S. GDP. This escalation is not primarily attributable to the trade imbalance or even the transfer of U.S. debt to overseas buyers.
Rather, the principal cause is that from 2019 to 2024, U.S. equity benchmarks climbed 83 percent, whereas non-U.S. indices only increased by 9 percent — signifying that a greater amount of affluence accrued to foreign holders of U.S. assets than the other way around.
Consequently, while the U.S.’s negative NIIP has dramatically expanded, Norway, China, Japan, Canada, South Africa, and Sweden possess substantial positive NIIPs. And these disparities nearly certainly expanded further in 2025, given that U.S. stock exchanges continued to climb.
Is this significant? Some economists might contend it is not, considering the NIIP is a theoretical accounting construct. In any case, Trump enjoys commemorating flourishing U.S. equities.
However, a key takeaway from this narrative is that should the U.S. technology boom burst, the repercussions would extend beyond America. Forbes estimates, for instance, that if U.S. stock valuations and foreign direct investment returned to 2019 benchmarks, Norway, Canada, Sweden, and China would experience an undoing of investment profits amounting to 20-40 percent of their GDP. Alarming.
A second observation is that greater subtlety is required concerning America’s “exorbitant privilege,” a term introduced by Valéry Giscard d’Estaing, the erstwhile French head of state. He objected to how foreign entities were compelled to continually purchase American debt, even amidst U.S. budgetary extravagance, owing to the dollar’s standing as a reserve currency, as this trend appeared to resemble foreigners subsidizing the U.S. and allowing the U.S. to spend more than it earned.
Yet the NIIP figures indicate that “this exorbitant privilege has 1771568306 transformed into more of a ‘munificent endowment’” from the U.S. to the global community, states Forbes. Or as a 2022 document by economists Andrew Atkeson, Jonathan Heathcote, and Fabrizio Perri reiterates: “Any retrospective ‘advantage’ that U.S. inhabitants might have formerly possessed has been nullified.”
Foreigners might dismiss this. However, the crucial insight is this: beneath the present atmosphere of tranquility, our worldwide financial framework is burdened by astonishing, frequently overlooked disparities. Perhaps these will subtly rectify (somewhat) if the dollar depreciates this year, or technology shares decline. But do not rely on that. As international investors continue to flock to the U.S., we confront an extremely disproportionate global landscape.
gillian.tett@ft.com