Tariffs & US Policy

Edmund Harriss
The US budget deficit overshadows the economy and resolving it within a transactional ideological framework is a priority for this administration. It shapes domestic policy, with government layoffs and the closure of federal programmes, especially those related to the environment, new energy, new transport. And it reshapes international trade and defence alliances.

The problem for the US is this, there is a gap between income and spending that means the government must borrow over $700 billion a year. On top of that, they need a further $900 billion to pay the interest on the debt they've already got. The $35 trillion debt pile is rising, as is the interest rate. It needs to be refinanced every six years and 40% of it is held by foreigners, especially in Asia and the Middle East. 

We see the rush to end the war in Ukraine and the pressure on allies to increase defence spending. Halving the US defence bill would save up to $400 billion. Pressure on trading partners to shift more business into the US and buy more US goods would help. Tariffs are a tool to push for that. Knowing what the administration wants is over half the battle, in discerning what comes next.