The article discusses the relationship between budget deficits and trade deficits, arguing that President Trump's push for tax cuts will exacerbate both. By increasing the budget deficit, the government will need to borrow more, leading to higher interest rates. This, in turn, strengthens the dollar, making American exports more expensive and imports cheaper. Consequently, the trade deficit will widen as Americans purchase more foreign goods with the tax cuts. It highlights how tax policy decisions can significantly influence broader economic patterns and international trade dynamics.
Budget deficits and trade deficits are twins. When the former go up, so, generally, do the latter.
The United States buys a lot of goods from other countries, and we pay for the goods with dollars.
If the budget deficit rises, American investors could theoretically cover the shortfall, but that would mean putting their money in Treasury securities rather than businesses.
A larger budget deficit will require the government to borrow more money, which drives up interest rates.
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