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The Rules of Wall Street launched by the trade war of President Donald Trump could be a “shift” for the will of foreign investors to hold American assets, warned the chief of the Congress Tax Guard dog.
“Even if we move away from the volatility of April, his memory will remain,” said Phillip Swagel, director of the Congressional Budget Office, at the Financial Times. “Something we are trying to understand is that there will be a sustainable hesitation among global investors while watching the United States.”
The pricing announcement of the “Liberation Day” of April 2 of Trump sparked acute volatility on the debt markets and the actions of the US government, the S&P 500 sharing index singing up to 15% and loan costs.
The markets stabilized after Trump interrupted most of the abrupt “reciprocal” samples, but concerns have persisted that changes in the president's erratic policy could unravel the enthusiasm of foreign investors for American assets. Actions in particular have surpassed world markets in recent years, which has prompted international investors to take important positions.
Swagel has said that the eagerness of international investors to collect American assets “supports American growth, supports job creation” and facilitates the government's ability to finance the country's significant budget deficit and sell the American public debt.
The CBO works on a 10 -year growth set and budgetary projections, which is in summer, which will produce its first complete assessment of the Trump administration’s economic agenda at a time when concern Government finances abound.
The director of the CBO said that he had not yet determined if the sale of American assets and the dollar triggered by the prices of April 2 would have a lasting impact, saying that the hard data offered small clues so far.
“Are we going to look back as the type of tilting point that has really led to major changes in the global economy and to a reduced role for the United States? Or will it be an episode of volatility which is overcome by other policies that improve growth (such as tax reductions and deregulation) and more stability?” He said.
The United States won the first agreement this week since Trump launched his trade war, forcing an agreement with the United Kingdom. But investors have remained concerned about Washington's ability to conclude agreements with other larger business partners such as China. They also wait to see how the other flagship policies of the president, including calls for tax reductions and deregulation, will take place.
“It is natural to think of the prices given the volatility of April, but there are so many other aspects of the American economy. It could be the stabilized tariff part, then the administration progresses in other areas,” said CBO director. “It would be a positive result. Or it could be that we look back and say, it was the beginning of a slower period of growth. ”
Swagel said it was “part of the constellation concerns that hesitation among global investors to put capital in the United States, or even simply to rebalance in a way that reduces their interest in American titles, would affect the dollar”.
The feeling among senior world financial officials – many of whom represent countries that have substantial dollars reserves – during this year's spring meetings for the IMF and the World Bank was “really the most negative that I remember”.
“Since then, I have been my feeling that the feeling has gone from super negative to more expectations and to see. It is therefore an improvement,” he added.
The Trump administration has recognized the “short -term pain” of prices, but believes that it is a price to pay to bring manufacturing home. It also praises the potential for samples to increase income and reduce the federal deficit.
The Treasury Secretary, Scott Bessent, plans to reduce the deficit by 6.4% in 2024 to 3% at the end of the president's second term.
Swagel said it was “certainly possible” that the Treasury Secretary could achieve his goal. “The combination of stronger growth and expenses of expenses could reduce the deficit. How much would depend on the details. “
The CBO awaits the adoption of a key budgetary measure, known as the “reconciliation” bill to assess the impact of new administration policies before producing its summer forecasts.
His previous prospects, published in March, have shown that American debt exceeding its post in the Second World War is later this decade.
“We just have to wait and see what comes out,” said Swagel, adding that his projections would also depend on the interest rates and reductions made by the so-called “Department of Elon Musk” department of government “.
Trump wants the bill to be adopted by July 4. Bessent said on Friday that Congress should act in mid-July or may violate the debt ceiling by August.
The bill should include measures that would make tax discounts promulgated during Trump's first term – which, according to CBO, would add $ 6 T to the next 10 years.
The CBO said that a 10% coverage rate would reduce deficits by 2.2 TN over the next 10 years. But higher charges would not necessarily increase income by proportional amounts.
“From a universal rate of 10% to 20, income would not increase 1 to 1,” he said. “At one point, if the high prices are supported, they will have wider (negative) economic impacts.”
