I asked Grok what the impact on the imposition of new US tariffs would be on the US debt that has to be refinanced this year. Here is its answer:
The imposition of tariffs by the United States in 2025, which led to higher Treasury yields (e.g., 2-year at 4.003%, 10-year at 4.282%), will increase the interest payments on U.S. debt maturing in 2025 after refinancing. Assuming $2.7 trillion to $4.05 trillion of debt matures in 2025:
- The average interest rate on this debt rises from 3.7% to 4.12% due to the tariff-driven yield increase.
- This results in an additional annual interest cost of $11.34 billion to $17.01 billion on the refinanced debt.
This increase could be higher if the Federal Reserve tightens monetary policy further or if additional tariffs (like the 10% universal tariff starting April 5, 2025) push yields up more. Conversely, if the Fed prioritizes economic growth over inflation control (e.g., by keeping rates lower), the increase in interest costs could be moderated. However, the net effect is a higher debt servicing burden for the U.S. government in 2025 and beyond due to the tariffs.
The combination of tariffs, huge cuts in government spending, and the elimination of government’s waste and fraud, will lead to the Dollar rising in value relative to other currencies such as the Yen, Euro, Pound, and Rial.
As other currencies sink in value, those overseas investors will realize that buying US Treasury bonds, even at zero percent yield is a good deal; although they won’t be getting any interest on those bonds, that will be made up for by increases in the dollar’s value. The dollar- denominated Treasuries become a safe haven for their investment even though it doesn’t pay any interest at all. It may even be possible to go to negative interest rates, where a face-value bond of $100 gets sold now for $110, then redeemed a few years later for the face-value of $100…. of course the Dollar vs that other currency must increase by more than 10% for that to work.. a recent example is the Yen declining in value over the past few years, from 120/dollar to 150/dollar… It would have been wise to invest yen into dollars during that time, even to invest at zero percent interest.
If tariffs lead to the Dollar becoming more valuable, the $14Trillion of government debt coming to term over the next three years could be rolled over at zero-percent, or even negative interest rates, saving the government close to a $Trillion in interest payments EACH YEAR.
Also, as the Dollar rises, the cost of imported items including OIL will decline; cheaper energy prices always leads to a better economy.
ChatGPT and Grok are wrong about interest rates, foreign exchange rates, the national debt, inflation and most of all WRONG about Trump’s policies.
Military peeps suckling off the government tit. Collect the check and give their opinion. My paycheck goes to a yes man.
.look yourself in the mirror.u sacrificed for the elite. Don’t
Play the victim card.
During this tariff discussion we keep hearing of the $37T debt but not the $220T in unfunded liabilities. Historically, countries this far in debt finance it away. That coupled with retaliatory UST dumping doesn’t seem to scream prosperity in either the short or long term. I am afraid third world status or physical oblivion is our fate.