The US federal debt has crossed $40 trillion, according to the Treasury Department. The milestone arrived as spending on the Iran war, tax cuts and tariff refunds outpaced tax revenue.
President Trump promised to restore fiscal order and reduce the debt burden. Instead, the borrowing binge has continued. The new figure raises fresh questions about the long-term fiscal path of the world's largest economy.
How the debt grew
Three items drove the latest surge. The conflict with Iran added billions in military spending. The tax cuts passed earlier in the term reduced revenue. And tariff refunds to companies ate into customs income.
Interest payments on the debt are also climbing. With the Federal Reserve keeping rates higher for longer, the cost of servicing $40 trillion in debt now eats a growing share of the federal budget.
Treasury Secretary Scott Bessent said he is confident inflation will retreat as the Iran conflict subsides. He also signaled confidence in newly installed Federal Reserve Chairman Kevin Warsh.
Trade war adds pressure
The debt news arrived as the US trade fight with Canada escalated. Canada announced retaliatory tariffs of up to 50 percent on US steel and other products. Ontario Premier Doug Ford warned of unprovoked attacks on the economy.
Canadian Finance Minister Francois-Philippe Champagne said Ottawa had no choice but to respond to the latest wave of US duties. Auto industries on both sides of the border are bracing for supply chain disruption.
Prime Minister Mark Carney accused Trump of wanting to destroy Canada's auto industry. He said talks can resume only if the US comes with the right attitude.
What economists watch
Economists are divided on how much the debt level matters. Some say the US can carry the load because investors still trust its bonds. Others warn that rising interest costs will crowd out spending on roads, schools and defense.
Wall Street will get its next signal on Friday, when the government publishes its monthly jobs report. The New York Fed, meanwhile, reports that credit card and auto loan delinquencies remain elevated, a sign that household finances are under strain.
For now, the $40 trillion mark is a number, not a crisis. But both parties know the bill will come due eventually.