It's 1D chess, really, and it isn't really Trump who came up with the idea. We're between a rock and a hard place. If we refinanced at 4.8%, the interest payment would go to $1.2T per year. If we refinance at a lower rate, it's lower. Note that we're not just refinancing either, we'll have to borrow about $1.8T, too, unless DOGE miraculously achieves its $1T/yr savings (doesn't look like it will, if the current trends are anything to go by). Tariff revenues would help to plug that hole somewhat. Then there's the issue of many countries having higher tariffs for our stuff than we have for theirs. That's not "free" trade. Then, finally, there's the issue of the near-irreversible erosion of the industrial base.
Warren Buffett warned about this back in 2003, and proposed an elegant solution, which, unfortunately, would require Congress to implement it through legislation: https://faculty.washington.edu/ss1110/IF/Buffett%20Fortune%2... But we do not have a functioning congress, so Buffett's solution is impossible.
> Tariff revenues would help to plug that hole somewhat.
"Somewhat" being a key operand here. America is a net importer globally, a protracted trade war is inherently leveraged against us. Neither the rock nor the hard place is forcing anyone to harass our trade partners and abandon our defensive alliances.
What do you mean? We can't afford to finance their security anymore. Nor can we afford their protective tariffs against our goods. Why can't we afford it? Because we're running $1.8T budget deficit, and paying $1T+ in interest on our debt next year. Because each man, woman and child in the US already owes $100K+ straight from birth. Do you just want to keep adding to that number hoping that we'll never turn into Zimbabwe?
That's the trouble with "barrier" tariffs and weighted tariff calculations. E.g. a lot of US agricultural products are subject to up to 50% tariff in the EU, so the US is simply unable to sell them there in significant quantity. What do you get as a result of a weighted tariff calculation? That's right, you get "low tariff". Japan is also interesting. It imposes insane tariffs (several hundred percent) on some US agricultural goods, but 0% on US cars. Why 0% on cars? Because they are able to basically disallow import of US cars through regulation.
There's also another aspect, beyond tariffs. In a very real sense, we're paying for the security of EU, Japan, and Canada. Why aren't they buying more of our goods or energy? How long can we foot the bill of over 2/3rds of NATO defense spending, _and_ run $900B+ trade deficits? To what end are we funding the security of developed countries, most of which are half across the world, who could fund it on their own? Why are they _still_ buying Russian oil and gas while we do all that? The whole situation is idiotic.
Trump basically has two levers when it comes to trade deficits: boost exports, and reduce imports. Of these he only directly controls the latter, but he's trying to pull both. And crash the treasury yields at the same time.
I'd like to eventually see the "import certificate" system that Buffett proposed in the 2003 article I linked above. It's a more free-market solution which does not pipe revenue through US government where a large chunk (or all) of it will disappear without ever reaching the exporters.
I read Buffett's proposed solution. It's clever - it must be about as close as you can get to a market based solution. But as you say, it won't be implemented, if for no other reason that Trump wouldn't trust a solution he doesn't control and doesn't directly benefit from.
His introduction to his solution reads more like a prophecy. Other countries, including have also taken the trade deficit path. Mine is nowhere far as down that path as the USA, but still it makes me nervous. I saw no way out - until Trump. It looks very likely Trump will make Buffett's prophecy come true. The fallout should make all sorts of thinks possible - including solving the trade deficit issue.
You think he, or the GOP would "benefit" from the stock market collapse? That contradicts all available evidence, at least for the short to medium term. I think the midterms are going to be an unprecedented bloodbath. Boomers won't allow their 401k's to decline even temporarily.
> You think he, or the GOP would "benefit" from the stock market collapse?
Uhmmm, no. Did I imply that? I can't see how Trump benefits from this, let alone anyone else in the USA. In fact I had to think long and hard to come up with anyone on the planet who benefits. Maybe Putin, but now he's up against a re-arming and united Europe.
I was just admiring Buffett's solution. It turns the debt into a marketable good, and so lets the market decide who will be best at getting reducing it. It probably would not work for some reason I can't think of, but it's very appealing.
But now I think about it, Buffett may benefit. He said in the article he's moved a lot of his portfolio overseas, according to the AI's around 40% of it. Lets assume the worst happens and the US dollar and economy falls off a cliff in the next 4 years. Trump and the rump of barnacles in the GOP that support him will be wiped off the political map, because as Biden discovered yet again, regardless of how well you govern "it's about the economy stupid", even if the economy was tanked by the other sides COVID bazooka 4 years prior. Buffett will move his portfolio back onshore after it all bottoms out and the price is cheap. The pain will be remembered so there won't be a repeat for at least a few decades. The USA will bounce back, and Buffett doubles his money. It's the typical Buffett play.
Warren Buffett warned about this back in 2003, and proposed an elegant solution, which, unfortunately, would require Congress to implement it through legislation: https://faculty.washington.edu/ss1110/IF/Buffett%20Fortune%2... But we do not have a functioning congress, so Buffett's solution is impossible.