Donald Trump, a president who has proven himself to be highly transactional and keen on reducing debt, may find a potentially trillion-dollar foreign IOU too tempting to overlook – even if it's over 100 years old. Britain borrowed roughly $4 billion from the U.S. during World War One. Afterwards, London resisted repayment, asking for the debt to be forgiven. Why? Because it was a so-called virtuous debt, incurred to fight an enemy common to both nations, and, Britain argued, it had paid in blood – lots of it.
After some push and pull, the U.S. largely went along, not insisting on repayment, opens new tab. The U.S. Treasury does not even include these debts in its official list of foreign debts outstanding.
However, the debt has never been officially cancelled. And given the power of compound interest, the liability would now be enormous. If one calculates interest at even the original concessionary rate of 3%, the amount owed in today’s terms would be in the trillions.
Could Trump resurrect this claim to use it as leverage in any future negotiations with Britain about trade or other matters? The answer is ... maybe.