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.
John H. Cochrane Economist at the Hoover Institution But the spike in interest rates require to do this would be huge. And the trade shock will cause a sharp recession, or worse, putting even more stress on the budget. A debt crisis is likely along the way as the US finds it impossible to roll over debt. Tariffs, saving, and investmentgrumpy-economist.com · 14 Apr 2025All korrents from this piece
Their wordsBut the spike in interest rates require to do this would be huge. And the trade shock will cause a sharp recession, or worse, putting even more stress on the budget. A debt crisis is likely along the way as the US finds it impossible to roll over debt.