Cutting off trade with tariffs would force a huge interest-rate spike and probably a debt crisis, because the budget deficit would have to be financed at home.

What this subject means

tariffs Taxes on imports: whether they close a trade deficit, what they do to prices, and what they are really for.

On the topicDo tariffs do what they are imposed to do?under our view: A trade deficit is a capital surplus, so the deficit to fix is the budget's

What John H. Cochrane actually said

Do you hold this korrent?Do you also believe this?

Rests on

The American trade deficit is foreigners choosing to invest in America, not America being cheated.

The predicted interest-rate spike follows only if the trade deficit is the capital surplus seen from the other side. If foreigners are not financing the budget deficit by buying American assets, closing the trade gap does not force domestic savings to replace them.

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