Investor Nigel Green says President Donald Trump's sweeping tax cuts could trigger a bond market meltdown.
Republicans, who hold narrow majorities in the House and Senate, have spent weeks trying to agree on a plan to cover the cost of extending the tax cuts — which nonpartisan analysts say could add another $4 trillion to the U.S.'s existing $36 trillion in debt over the next decade.
Trump is pushing a plan to explicitly use revenue from higher tariffs on imported goods to help pay for extending trillions of dollars in tax cuts, an unprecedented shift likely to face opposition from many of his fellow Republicans in Congress.
The U.S. collects less than $100 billion annually in trade penalties imposed on imported goods as a tool to protect and grow domestic industries. That money is rarely a topic in Washington's routine budget battles because it makes up so little of the federal government's revenue.
The House Ways and Means Committee, the main tax-writing panel in the lower chamber, included a 10% across-the-board tariff in its menu of options to pay for extending the tax cuts, according to a recent memo seen by Reuters. It estimated such a tariff regime would fetch $1.9 trillion over 10 years, according to the memo. Extending the tax cuts Trump passed during his first term and that expire this year would cost $4 trillion over 10 years, analysts estimate.
But that still might not be enough, says Green, founder and CEO of deVere Group.
"This fiscal black hole is getting larger and larger and sending the budget deficit of the world's largest economy skyrocketing," Green said Friday during a client webinar, reports DIY Investor.
"Bond markets are watching closely. And there's a legitimate risk that if investors get spooked and start selling off U.S. Treasuries en masse, we could see a repeat of the U.K.'s Liz Truss debacle —but on a much larger, more devastating scale."
Green also warned that if the federal reserve is forced to hike rates again that "could set the stage for a full-blown fiscal crisis."
"The U.S. dollar — currently a pillar of global stability — would be thrown into chaos. And let's be clear: If the bond market revolts, it won't be just an American problem; it will ripple across the world," he said.
Information from Reuters was used in this report.
Solange Reyner ✉
Solange Reyner is a writer and editor for Newsmax. She has more than 15 years in the journalism industry reporting and covering news, sports and politics.
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