Investors are increasingly concerned about the risks associated with U.S. debt, especially after President Trump implemented an equal tariff policy, leading to a significant sell-off in the market. There are now fears circulating that "U.S. debt may collapse."

Investment experts indicate that U.S. debt is considered "too big to fail" as it possesses a AAA rating, suggesting that Trump cannot afford a collapse. In light of this, investors are being advised against investing in U.S. debt ETFs.

According to Jiang Yuteng, manager of the Cathay 20-Year U.S. Treasury Fund, Trump's tariff war has shaken investor confidence, reigniting concerns about stagnation and inflation. Reports have surfaced that China is reducing its holdings of U.S. debt as a pressure tactic against Trump. Despite recent turmoil caused by hedge fund liquidations, Treasury prices have gradually stabilized, with the 10-year Treasury yield dropping to 4.3%, still elevated.

Amidst the weak performance of U.S. debt, Treasury Secretary Bentsen recently stated that the government is equipped to handle any potential market fluctuations, such as increasing its buyback capabilities. Moreover, data from EPFR shows that since the Federal Reserve began its rate-cutting cycle in September, funds have consistently flowed into developed country bond markets, with net inflows exceeding $300 billion up to last week, indicating that the yield on Treasury bonds is attracting long-term investment funds.

Li Yuling, manager of the Cathay Investment-Grade Corporate Bond Fund, pointed out that current U.S. Treasury yields are influenced by two opposing forces: first, concerns that tariffs could reignite inflation which might lead the Federal Reserve to slow its rate-cutting pace or even raise rates; and second, worries that Trump's policies could result in an economic slowdown, which could prompt the Fed to aggressively cut rates to stabilize the market during a recession. Li suggests that investors consider diversifying into high-yield investment-grade corporate bonds as a means of navigating through these challenges, as they are less impacted by economic downturns and can provide stable income through interest payments.