US national debt could hit 135 percent of GDP under Trump policies

The United States faces a significant fiscal transformation as the incoming administration prepares to implement major tax adjustments. Analysts at the Institute of International Finance (IIF) project that national debt will climb from its current level of approximately 100 percent of GDP to more than 135 percent over the next decade. This outlook is driven by proposals to eliminate taxes on tips and overtime pay without corresponding reductions in federal spending. The IIF warns that if these tax cuts prove more costly than currently anticipated, the debt-to-GDP ratio could exceed 150 percent.

Economic indicators are already reflecting these shifts. The yield on 30-year US Treasury bonds, which served as a traditional safe haven, has risen from a low of under 4pc in September to more than 4.5pc today. This increase signals rising investor concern regarding long-term fiscal sustainability and potential inflation. The IIF predicts that the combination of fiscal stimulus, increased tariffs on imported goods, and restrictive immigration policies — which could impact labor-heavy sectors like construction and healthcare — will likely exert upward pressure on prices. Consequently, this environment may force the Federal Reserve to reconsider its strategy, keeping borrowing costs higher for longer rather than continuing with rate cuts.

Related imagery

While the president-elect has announced the formation of a new Department of Government Efficiency to be led by Elon Musk and Vivek Ramaswamy, the fiscal impact of these initiatives remains unclear. Mr. Musk has suggested he could save the government $2 trillion. Economists have expressed doubts about how feasible this is. Paul Mortimer-Lee, an independent economist and research fellow at Niesr, has pointed out that cuts on such a scale would wipe out the equivalent of the budget for transport, education, housing, social services, science and the environment, as well as decimating other benefits like Medicare.

Market Volatility and SpaceX Valuation

The broader economic uncertainty coincides with a period of intense volatility for SpaceX. After its public debut on June 12, 2026, at an IPO price of $135 per share, the company’s valuation peaked at nearly $2.9 trillion on June 16, 2026, with shares reaching $225.64. By mid-July 2026, however, investor sentiment shifted significantly. On July 15, 2026, SpaceX shares dropped below their $135 IPO price for the first time. The company’s market value has contracted by more than $1.2 trillion since its June peak.

The decline follows a reappraisal of the firm’s financial fundamentals. Although SpaceX reported $18.7 billion in revenue for 2025, it posted a net loss of $4.9 billion. The company’s complex business structure, which combines the profitable Starlink satellite internet service with capital-intensive ventures in artificial intelligence and rocket development, has drawn scrutiny from analysts. Debt markets have responded with skepticism, with some of the company’s recent bond issuances trading at levels typically associated with junk-rated debt.

Comparative Financial Indicators

As global investors assess these conditions, the dollar’s status as a reserve currency remains a critical factor. While the US retains a high capacity for borrowing compared to other nations, the IIF suggests that the planned fiscal and trade policies may test the limits of this fiscal endurance.