Thayer Consultancy Background Brief:

ABN # 65 648 097 123

U.S. Debt Ceiling and Impact on
U.S. Reputation in Asia
May 27, 2023

We are writing a report about the ongoing debt ceiling impasse in the United States
and the impact it is having on America’s reputation in Asia. We request your insights
for inclusion in the report.
Q1. Broadly speaking, what do you think the impact of the debt-ceiling dispute is
having on how U.S. allies and non-aligned countries in Asia view the United States,
especially in terms of its status as a regional power?
ANSWER: Australia was the most impacted country in the Indo-Pacific because it was
due to host a Quad leaders’ meeting and President Biden’s address to a joint sitting of
Parliament.
The reaction in Australia was generally one of sympathetic understanding of the
salience of domestic pressures on Biden. A slew of op ed pieces appeared in the media.
The majority passed off Biden’s decision not to come as inconsequential in the long
run. The minority held the view that Biden’s no show was yet more evidence that the
U.S. was an unreliable ally.
The debt ceiling impasse only added to uncertainty about United States leadership in
the Indo-Pacific particularly because it is linked with the onset of the primary season
where political polarization in the United States is on full display.
Q2. If this dispute is resolved, could the uncertainty it has created – especially for Asian
holders of U.S. Treasury debt –create reputational damage for the United States and
its centrality in the international financial system?
ANSWER: No matter whether Asian countries want the U.S. to stay engaged in the
region or view the U.S. as a destabilizing power, the debt ceiling impasse only
highlights the primacy of American domestic politics and adds uncertainty about U.S.
economic engagement the Indo-Pacific.
Even if the debt ceiling impasse is resolved, it will undermine to a certain extent the
credibility of the U.S. dollar as the world’s reserve currency.
Q3. How will competitors like China and Russia exploit this?
ANSWER: The atmospherics of the U.S. debt ceiling dispute are being played out live
on regional TV. Media coverage only adds grist to Xi Jinping’s propaganda mill that
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China’s model delivers while the U.S. is in decline. The debt ceiling dispute will spur
China to promote its currency as an alternate to the U.S. dollar;
Vladimir Putin will view the atmospherics surrounding the debt ceiling impasse as
confirming his view that the United States is fundamentally weak and will lack the
staying power to continuing to support the Ukraine. Russian disinformation will try to
drive a wedge into the largely European coalition following U.S. leadership on Putin’s
war in Ukraine. Russian disinformation could also be employed to exacerbate
differences in both the Democratic and Republican parties.

Suggested citation: Carlyle A. Thayer, “U.S. Debt Ceiling and Impact on U.S. Reputation
in Asia,” Thayer Consultancy Background Brief, May 27, 2023. All background briefs
are posted on Scribd.com (search for Thayer). To remove yourself from the mailing list
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Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.