U.S. Debt Default Fears Rise Amid $36 Trillion Liability

Concerns regarding the potential for a global trade war have intensified, particularly in response to President Trump's proposed tariffs targeting various sectors, including lumber and pharmaceuticals. Fitch Ratings highlights that Mexico and Canada are particularly vulnerable to the fallout from these trade policies, which could significantly impact global economic growth. Investor sentiment has shifted, with a recent Bank of America survey revealing that 42% of fund managers now identify trade war risks as the biggest threat to risky assets, surpassing concerns over inflation and interest rates. Additionally, inflation expectations have risen amid fears that companies will pass increased costs from tariffs onto consumers, complicating the Federal Reserve's efforts to maintain stable prices. The apprehension surrounding U.S. equities continues, with 89% of fund managers indicating they are historically overvalued, amidst a backdrop of geopolitical tensions and economic uncertainty. Overall, the combination of these factors poses a complex challenge for the U.S. economy and its fiscal policy.