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President Donald Trump’s trade war has focused much of Wall Street’s attention on the U.S. current account deficit, or the imbalance between imports and exports. But there’s another metric worth following that could worsen financial risks.
According to Kevin Ford, FX and macro strategist at Convera, the country’s net international investment position (NIIP) often gets overlooked.
It measures how much the U.S. owns abroad versus how much the world owns in the U.S., he said in a note last week, describing it as America’s financial scorecard with the rest of the world. And by that score, the U.S. is in the red by about $26 trillion, or nearly 80% of GDP.
“That means foreign investors hold way more American assets than Americans hold abroad,” Ford added. “It’s a setup that works fine when confidence is high, but in shaky times like 2025, it can become a pressure cooker.”
Indeed, times have been shaky. The U.S. Dollar Index is down 10% so far this year as the shock of Trump’s “Liberation Day” tariffs continues to reverberate, creating doubts about U.S. assets once deemed reliable safe havens.
In fact, the dollar’s year-to-date plunge is the worst since the U.S. transitioned to a free-floating exchange rate in 1973, effectively ending the post-World War II system of fixed rates under the Bretton Woods agreement.
Meanwhile, legislation that would add trillions of dollars to fiscal deficits is advancing in Congress, stirring more anxiety among foreign investors, especially those who hold U.S. debt.
Put it all together, and this year has been a textbook example of how a negative NIIP profile can magnify currency turmoil, Ford warned.
“And because so much of the capital propping up the U.S. financial system comes from abroad, even small shifts in sentiment can lead to big outflows,” he added. “That’s a lot of dollars being sold, and fewer being bought, and voilà, the greenback stumbles.”
Circling back to the financial scorecard analogy, Ford explained that the problem with focusing on the current account deficit is that it only shows the flow of transactions, i.e. imports versus exports.
By contrast, the NIIP shows the overall pile of debts—and ignoring that would be like judging a person’s spending habits without checking their credit card balance, he said, making trust “your most important asset.”
“Yes, trade deficits, interest rates, and Fed signals all play a role, but the NIIP tells you just how exposed the U.S. is when things go sideways,” Ford concluded. “It’s the quiet structural risk lurking under the surface, ready to amplify shocks. And in a year like this, it’s been shouting, not whispering.”
Waning confidence in the dollar has spurred investors and central banks around the world to load up on goldwhich has soared in price in recent years and particularly this year, surging 21% in 2025.
Trump’s unrelenting pressure on Federal Reserve Chairman Jerome Powell to cut interest rates has also weakened the dollar lately.
While many on Wall Street see even more downside potential ahead for the dollar, the AI boom that’s still drawing billions in global investment flows to the U.S. offers some hope for relief.
