Canada holds, as of last November, $374.4 B in securities against the United States $7.9 T national debt. That’s about 5% of the total. I asked ChatGPT what would happen if we cashed out of it. Turns out, that’s Canada’s fail safe in a Trump trade war.

Thanks for the friendly edits. Yes, as of January 2025, the total US debt weighs in at the total national debt of the United States is approximately $36.22 trillion. That’s a US debt to GDP ratio of 121% or so (based on 2024 numbers). Canada’s debt to GDP is around 106%, the lowest in the G7.

Of the $36.22 T U.S. debt, $7.9 T is held by other sovereign governments. Calling that debt would, as the results below suggest, hurt Trump like a damn.

Short answer, Trump would see his country into bankruptcy.

If Canada were to sell all its U.S. securities, including U.S. Treasury bonds and other investments, the move could have significant economic and geopolitical consequences. Here’s how it might benefit Canada and hurt the United States:

Potential Benefits for Canada: 1. Reduced Exposure to U.S. Economic Risks • If Canada is concerned about U.S. debt levels, inflation, or economic instability, selling U.S. securities could limit exposure to potential losses if the U.S. dollar weakens or bond values decline. 2. Diversification of Reserves • Canada could reinvest the proceeds into a more diversified portfolio, including gold, other sovereign bonds (e.g., European, Japanese, or Chinese assets), or domestic infrastructure and economic development. 3. Exchange Rate Benefits (If Managed Well) • Selling U.S. securities would likely result in an influx of U.S. dollars, which could be used to strengthen the Canadian dollar. A stronger CAD might make imports cheaper for Canadian businesses and consumers. 4. Political Leverage • A large-scale sale could be used as a geopolitical bargaining tool, signaling discontent with U.S. policies (e.g., trade disputes, military alliances, or economic decisions).

Potential Harms to the United States: 1. Rising U.S. Interest Rates • If Canada sells a significant amount of U.S. Treasury bonds, it could lead to lower demand, forcing the U.S. government to offer higher interest rates to attract buyers. Higher rates would increase borrowing costs for the U.S. government, businesses, and consumers. 2. Weaker U.S. Dollar • A major sale could put downward pressure on the U.S. dollar, reducing its purchasing power and potentially contributing to inflation in the U.S. 3. Market Instability • If Canada’s sell-off triggers panic or is followed by other countries (e.g., China, Japan, or oil-exporting nations), it could cause volatility in financial markets, leading to stock market declines and economic uncertainty. 4. Strained U.S.-Canada Relations • The U.S. might see this as an unfriendly act, potentially leading to diplomatic and economic repercussions, such as retaliatory trade measures or reduced cooperation on key issues.

Possible Downsides for Canada: • Losses on Sales: If bond prices are lower than when Canada purchased them, selling could result in financial losses. • Retaliation from the U.S.: The U.S. could impose trade barriers or other economic penalties. • Currency Volatility: If poorly managed, the sale could lead to excessive CAD appreciation, harming Canadian exports.

Conclusion:

While cashing out U.S. securities could offer Canada some financial flexibility and diversification, it risks destabilizing markets and damaging U.S.-Canada relations. The U.S. would likely suffer from higher borrowing costs and economic volatility, but Canada could also face unintended consequences if the move disrupts trade and investment flows between the two nations.