Trump wants a weaker dollar. His preference is for "not a weak dollar, but a weaker dollar", arguing that a somewhat diminished currency value benefits U.S. exports and manufacturing. The dollar has fallen by about 8 percent since he took office.
Kenneth Rogoff at Harvard Kennedy School for Business and Government said, "Donald Trump believes that devaluing the dollar will restore America’s manufacturing sector to its former glory. But even if the greenback weakens sooner rather than later – as looks likely, regardless of policy decisions – a second Trump administration would probably still forge ahead with its disastrous tariff plan."
To do this, Trump wants to continue transforming the US into an export economy with the focus on the trade deficit.
Trump’s choice for treasury secretary, hedge fund manager Scott Bessent, has laid out an economic plan known as “3-3-3,” which involves reducing the federal budget deficit down to 3 percent of gross domestic product (GDP), getting real GDP growth to 3 percent, and producing an additional 3 million barrels of oil a day by 2028.
This would more than fully close the fiscal gap, leaving debt as a percentage of GDP slowly declining in the long run. Bessent explicitly stated that extending the 2017 tax cuts is a priority, and he would likely rule out tax increases on the wealthy to pay for them. This suggests a deficit target of 3 percent of GDP would require large taxes on imported goods.
The U.S. has lived with a massive trade deficit for decades. But under President Donald Trump’s sweeping tariffs, that gap is suddenly narrowing — and much faster than many expected.
“On the trade balance, which we know is going to be a deficit, we’re expecting a number around $58 billion,” Rick Santelli said. As he read through the Commerce Department’s update, his tone shifted. “Buckle up, this is unreal! The movement in this number: -$29.4 billion — we cut it basically in half! We cut it in half!”
October’s $29.4 billion trade deficit didn’t just come in well below economists’ forecasts — it marked a 39% drop from September’s $48.1 billion gap.
As debt crosses $40T interest on debt is over $1T a year (more than social security) acts as headwind to productivity.
The recent release of the final Monthly Treasury Statement from the Treasury Department shows that net interest costs totaled $882 billion in Fiscal Year (FY) 2024. The Monthly Treasury Statement shows that:
- Net interest spending increased by $223 billion from FY 2023 and has nearly tripled since 2020.
- Interest was the second largest federal expenditure in FY 2024, behind only Social Security.
- We spent more on interest on the national debt in FY 2024 than national defense or Medicare.
Reducing rates now will continue to inflate, if you don’t want pay interest on credit card? Pay it off monthly.
More vital is DC's refusal to cut spending; also inflationary. Inflation is the increase in the prices of goods and services over time.
Tariff money on imports could slow as exports for cheaper dollar denominated items dominate while the cost of living in the US becomes more expensive (electric bills have double in some places, HB1 visas and CDLs issued by states for cheaper labor, deportations of illegals raising labor costs). Energy and labor are often the two largest line items for corporations that could slow the economy and stop stock market gains, 2025 Nasdaq did best domestically, but international markets did better last year. Rising all boats.
This type of command economy can give a false impression that socialism works when it is really cheap imported labor gains off setting Green New deal increased energy inputs.
Editorial comments expressed in this column are the sole opinion of the writer.
