Again there is unrest on the market for US national debt: this time about Trumps tax plans

On the market for US government bonds, a negative response was made on Monday to the downgrading of the US credit status – and therefore to the budget plans of the Republicans of President Donald Trump. On the first normal trading day since credit rating agency Moody’s on Friday after -fair lowered the ‘rating’ for US national debt, the interest on long -term bonds increased.

This makes it even more expensive for the federal government to borrow money, while the US is already struggling with increasing interest charges. The interest on 10-year-old Treasury BondsThat is considered the most important rate, rose in the first hours by nearly ten basic points, which is an unusually big leap. The interest on 30-year bonds just touched the 5 percent: the highest level in a year and a half. In the meantime, the dollar dropped and the stock exchanges went into the min.

Tax plan in the making

Investors thus expressed their concerns about the sustainability of US public finances, now that the Republicans want to use their majority in both rooms of the congress to lower taxes. On Sunday they take a first step by taking on a proposal at a committee level. In the coming weeks this will be dealt with in the entire house and by the Senate, where it is not a foregone conclusion that it will be assumed in this version.

However, it seems clear that substantial tax reductions are coming. The government party wants to extend Trumps so -called Tax Cuts and Jobs Act From 2017, which will expire later this year, will take on one of his most important election promises. However, this burden lighting, which will again benefit the highest incomes, will cost the treasury in the coming years thousands of billions. The Republicans also want cutbacks, including on the subsidies established by the previous Bides for the energy transition and on health insurance Medicid. But those savings cover the gap in the budget anything but.

Moreover, the US already have a high budget deficit, more than 6 percent of GDP, an inheritance of the stimulation measures that were taken during and after the Coronapandemie. The national debt is also high at 36,000 billion dollars (more than 120 percent of GDP). To finance that growing debt mountain, the US has already lost as much to interest charges as on their defense budget. In the coming years, the loan costs will only increase, especially if the interest rates will continue to rise.

Investors have long been worried about the chronic lack of tax discipline in Washington. They charge the US a considerably higher interest rate than former ‘Problemanden’ from the eurozone, such as Italy and Greece. And after Fitch and Standard & Poor’s who were already taking step in 2011 and 2023, Moody’s was the last major credit rating agency that reduced the American Triple-A status to the second highest level (AA1). The office mentioned the Republican tax plans as one of the main reasons for his decision.

Also unrest about taxing policy

At the beginning of April it was also restless on the market for US national debt for a few days. Investors then dumped bonds because they had no confidence in the ‘reciprocal import duties announced by Trump’ against dozens of trading partners. In the midst of the ascending interest rates, the White House had to get a baking sail and pause the taxes for ninety days. At the beginning of last week, a temporary file was also closed in the rates war with China, after which the stock market races further raised.

However, the uncertainty among investors about the US economy and public finances can continue to flare up, proves this troubled start of the new stock exchange week.

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