What is Trump’s Achilles’ heel? It is produced by theenormous and growing public deficit, which obliges the US to find buyers of Treasury bonds for at least two trillion dollars more each year – compared to the previous year – in the hope of not having to increase the interest offered in order to attract investment.
If Trump failed in this mission, if he failed to contain the burden of the national debt and to ensure its smooth financing, then he would also be doomed to fail in his most important promise to the voters: to confirm in 2026 the tax cuts for corporations already enacted in his first term (from 35% to 21%) and to strengthen them to 15%.
This is where we Europeans come in, in two ways. First, because waving the threat of punitive tariffs for Trump and his team is a scheme to force other countries to buy and hold more US government bonds; in this way, the US could finance its growing public deficit while keeping interest rates on debt under control.
In essence, Trump is trying to put Europe in front of a brutal alternative: buy more US debt as it is issued – and buy it despite low yields – or risk losing access to the US consumer market and what remains of the Pentagon’s security umbrella. Read this article.
