The United States has crossed a symbolic milestone: The national debt is now larger than its gross domestic product. But it's not the level of that ratio that is alarming — it's the trajectory.

The big picture: There's nothing inherently unsustainable about a 100% debt-to-GDP level. What matters is why it got that high, the prospects for future borrowing, and the forecast for growth and borrowing costs.

• Across those dimensions, the U.S. fiscal outlook is exceptionally gloomy, in ways not reflected in much of the day-to-day political discourse.

Catch up quick: The Commerce Department last week reported $31.9 trillion annualized GDP in Q1. That surpasses the $31.4 trillion in debt held by the public on the last day of the quarter.

• The U.S. debt-to-GDP ratio briefly topped 100% during the early days of the COVID-19 pandemic when economic activity collapsed. But before that, it hadn't exceeded that ratio since the aftermath of World War II.
• The ratio is on track to continue rising, with the Congressional Budget Office projecting it will reach 120% in 2036.

Zoom in: Consider a family with $100,000 in debt and an annual income of $100,000. Is their debt excessive? The answer, of course, is that it depends.

• If the family ran up that debt due to one-time expenses that won't recur and has a low interest rate, rising income and day-to-day spending in line with what they bring in, they're probably fine.
• If, on the other hand, they ran up that debt to support routine living expenses in excess of their earnings and have a high interest rate and stagnant income, it would raise serious alarm bells.

Zoom out: The U.S. government is more like the latter family. The CBO projects federal revenue in the next few years will be 17% to 18% of GDP, while expenditures will be north of 23% of GDP.

• That gap, of around 6% of GDP, is higher than the CBO's GDP growth projection, which would imply an ever-rising debt-to-GDP ratio.
• In those projections, the federal government's interest expenses soar to new heights as a share of the economy — surpassing $1.5 trillion and 4% of GDP in 2031.
• That assumes interest rates remain broadly in their current zone, with a 10-year Treasury note yielding about 4.4% — and that bond investors prove willing to continue financing an ever-growing debt at those levels.

Flashback: At the end of World War II, by contrast, the debt-to-GDP ratio was set to plunge as wartime spending wound down and the private-sector workforce exploded, thanks to returning soldiers and a population boom.

• Now, the share of Americans at retirement age is surging, labor force growth has slowed precipitously amid restrictive immigration policy, and the Trump administration seeks to increase military spending.

Yes, but: One potential saving grace would be if artificial intelligence brings the kind of surge in productivity that its biggest enthusiasts predict.

• That would help the denominator of the debt-to-GDP equation by expanding economic activity.
• That said, it could create its own problems on the numerator, as federal government revenues are heavily dependent on taxing labor income.

The bottom line: The national debt hitting 100% of GDP isn't a worry in and of itself, and it isn't some magical threshold. What is worrying are the details of how it got there, and what comes next.

President Trump threatened to blow up his trade deal with the EU, the latest signal that the trade agreements reached after "Liberation Day" are not as settled as they might have seemed.

Why it matters: The episode reveals the limitations of tentative deals intended to bring stability to major trade relationships. None are legally binding, and even with more limited tariff powers, Washington has shown it can upend them at any moment.

Driving the news: Trump threatened Friday to increase tariffs on European autos to 25% — from 15%, the rate his own Turnberry Agreement set last July — accusing Brussels of failing to meet its commitments under the deal.

• "[B]ased on the fact the European Union is not complying with our fully agreed to Trade Deal, next week I will be increasing Tariffs charged to the European Union for Cars and Trucks coming into the United States," Trump wrote on Truth Social.

A White House official said on Friday that the EU had not made "substantial progress" on agreed-upon commitments.

• The official added that "the President reserves the right to adjust tariff rates if our trade deal partners fail to abide by their commitments, and as per his TRUTH Social post, the President will accordingly be adjusting Section 232 auto tariffs on the EU."

The other side: The EU said it has been implementing the agreement in line with its standard legislative procedure.

• "While the EU delivers, the US side keeps breaking its commitments," Bernd Lange, Europe's top trade legislator, wrote on X Friday — adding that higher tariffs targeting cars shows "clear unreliability" on the U.S.
• The European Commission suggested that retaliation is on the table: "Should the US take measures inconsistent with the Joint Statement, we will keep our options open to protect EU interests," a spokesperson said Friday.

What to watch: The transatlantic relationship is under new stress on the trade and security fronts.

• The auto tariff threat landed hours before the Pentagon said it would withdraw thousands of troops from Germany after its chancellor expressed public skepticism about the Iran war.