The United States may continue to lead the global economy, but its growing debt burden has emerged as the biggest risk to its economic pillar. According to a Deutsche Bank Research Institute report, America’s debt burden has emerged as the biggest threat to its long-term economic leadership, with mounting deficits and rising borrowing costs gradually eroding one of the country’s biggest structural advantages. The report warns that this fiscal deterioration could pose a greater risk to the US economy than external competition.The assessment, published in a thematic report ahead of the 250th anniversary of the US Declaration of Independence, said that while China’s growing influence has reduced the US lead in areas such as manufacturing and trade, the country’s own fiscal outlook presents the more immediate challenge to its long-term economic standing.“The US fiscal trajectory is the most plausible catalyst to accelerate that erosion, and for institutional investors is the single most concrete macroeconomic risk facing the United States,” the report said.According to the report, the US has continued to run federal deficits of around 5-6% of GDP since 2022, even though the economy has remained close to full employment. It described these as “the highest peacetime deficits in US history outside of a major recession.”The institute said government borrowing has reached a point where debt held by the public is expected to exceed 100% of GDP this year. At the same time, the cost of servicing that debt has risen sharply, with interest payments now surpassing defence spending to become the fastest-growing component of the federal budget.The report also highlighted growing pressure from entitlement programmes, saying key social welfare funds are approaching financial constraints. It projected that the Social Security trust fund would be exhausted by late 2032, resulting in automatic benefit reductions unless lawmakers take action. Medicare, it added, is expected to encounter a similar funding challenge shortly afterwards.“While the unsustainability of the US public debt trajectory has been in the headlines for many years, these events are now more imminent — ones that the next US administration that takes office after the 2028 election will have to face,” the report said.Beyond public finances, Deutsche Bank said sustained fiscal deterioration could slowly chip away at the US dollar’s position as the world’s dominant reserve currency. It stressed that it does not foresee another currency replacing the dollar in the near future, but expects its global reserve status to experience a “gradual erosion” rather than a sudden decline.The report noted that the dollar’s share of global foreign exchange reserves has dropped from roughly 72% to 58% over the past 20 years. During the same period, central banks have increased their gold holdings, while a number of countries have begun exploring alternatives amid sanctions and evolving global trade patterns.Despite outlining these fiscal risks, the report maintained that the US remains well placed to preserve its economic leadership because of enduring structural strengths. These include its deep capital markets, leadership in technology, abundant energy resources and its advantage in artificial intelligence.“The challenges facing the US are real, but the weight of evidence still suggests it will remain the world’s leading economy for the foreseeable future,” the report said, adding that its “collective structural advantages remain difficult to replicate.”