The economist asks the question and says, in part, yes.
Rehessing the global economy is the decisive cause of Donald Trump. China should produce less and consume more, the president thinks; Meanwhile, the United States should produce more for Reindustry. There is a final logical step for this equation: the United States should also consume less.
Such Abstemianess is inevitable for Maga to join, as the administration admits. Scott Besent, the Secretary of the Treasury, demands “less consumption”; More floridally, Trump says that his commercial war could result in children having “two dolls instead of 30”. As JD Vance, the vice president, says: “One million cheap imitation toasters are not worth the price of a single American manufacturing work.”
The article quotes Hubbard, Navarro (back before “Death for China”), Bernanke, Obstfeld, Gagnon and Tuya really. In the latter:
Chinn estimates that a reduction in a percentage point in the budget deficit would be the current current account deficit in approximately half of a percentage point. For his part, Mr. Obstfeld is overwhelming about the alternative to a fiscal rebalancing: “If the government continues to borrow as it is, it is quite unlikely that we will once achieve a commercial surplus.”
Several potential routes to smaller budgetary deficits would have the additional benefit of encouraging consumers to save. For example, if the government reforms health pension programs and the guest to make the issue generous as the population ages, it would be rational for households to save more tremors. The government could also implement a well -designed consumption tax at the national level (the complete absence of such tax makes the United States unusual). Unfortunately, the political reality is that there is no fiscal consolidation in sight. Trump’s tax bill, which makes its way through Congress, will prolong huge deficits.
Here is the article chart:
Fountain: Economist.
This point does not mean that one must go directly to government expenses. Rather, the highest tax rates, the greatest savings in pension programs would, the narrower budget deficits could go far in the stabilization of the-PCD debt and the external liabilities net to the GDP. I think it is likely to be much less painful than destroying the American exorbitant privilege by making global investors care about breach in US treasure.
By the way, the 0.5 coefficient comes from my work with Hiro Ito, Barry Eichernen and Eswar Prasad; More recently, Chinn and Ito (Jimf, 2025) and Chinn and Ito (2021), for example.
