The Global Money Shift Has Started... And the U.S. Is on the Wrong Side of It

China is piling up cash while America piles up debt. That divergence isn’t politics... it’s math.

There’s an old rule in finance…

The country with the cash (purchasing power) eventually writes the rules.

Right now, the scoreboard is moving… fast.

China just posted a $242 billion current account surplus in the final quarter of 2025, bringing its full-year surplus to about $735 billion.

That’s not pocket change. That’s strategic ammunition.

At the same time, U.S. fiscal projections are heading the opposite direction.

The U.S. federal deficit is expected to climb from roughly $1.9 trillion in 2026 to about $3.1 trillion annually by 2036.

Debt held by the public is projected to reach 120% of GDP, exceeding the level seen after World War II.

One country is accumulating capital.
The other is accumulating obligations.

Those are not equivalent trajectories.

Surplus vs Borrowing… Why It Matters

When a nation runs persistent surpluses, it builds foreign reserves, buys assets, and gains leverage over trading partners.

When a nation runs persistent deficits, it depends on lenders.

That dependence quietly shifts power.

China’s surplus is also happening despite tariffs.

Its exports grew about 6.4% year-over-year in late 2025, while imports rose much more slowly. That tells you global demand for Chinese goods remains strong outside the United States.

Meanwhile, research from the New York Federal Reserve found that most tariff costs… over 80% … were paid by U.S. importers and consumers, not foreign exporters.

In other words, tariffs didn’t dramatically weaken China.

They mostly raised prices at home.

The Debt Spiral Problem

The more concerning piece isn’t just the deficit itself… it’s interest.

U.S. net interest costs are projected to rise from around $1 trillion per year to over $2 trillion by the mid-2030s.

That means a growing portion of borrowing goes toward servicing existing debt rather than funding new investments.

That’s the financial equivalent of paying credit card interest with another credit card.

Countries can run deficits for a long time. But when interest starts dominating spending, flexibility disappears.

And flexibility is power.

Why China’s Surplus Changes the Game

Surplus nations have options.

China can…

• Accumulate gold and reserves

• Invest globally in infrastructure and resources

• Fund alternative financial systems

• Reduce dependence on the U.S. dollar

Deficit nations have fewer choices.

They must keep attracting buyers for their debt.

If major creditors reduce purchases… or demand higher yields… borrowing costs rise further. That compounds the cycle.

It becomes self-reinforcing.

The Bigger Picture

None of this means the United States is collapsing tomorrow. The dollar still holds reserve currency status, and the U.S. economy remains enormous.

But trends matter more than snapshots.

And the trend line right now shows…

• China gaining financial capacity

• The U.S. losing fiscal room

• Global capital flows gradually diversifying

That’s how power shifts historically… not with a bang, but with spreadsheets.

Where Canada Fits

For Canada, this matters enormously.

We sit beside the largest debtor nation on Earth while global capital networks diversify. That creates both risk and opportunity.

Smart policy means…

• Expanding trade relationships beyond the U.S.

• Strengthening domestic industries

• Maintaining fiscal credibility

In unstable times, credibility becomes currency.

Countries that manage their finances well attract investment.
Countries that don’t pay more for it.

Simple as that.

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The Recap…

China is stacking cash.
The U.S. is stacking debt.

That divergence isn’t ideology… it’s arithmetic.

And when global money flows change, geopolitics follows.

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The Gut Punch…

He who lends the money eventually sets the terms.

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Source Credit:

Source: Economic data from China SAFE, U.S. Congressional Budget Office projections, and Federal Reserve research summaries.

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