Introduction:

An in-depth look at recent significant developments in US economic policy under the Trump administration, focusing on the passage of a major tax and spending bill and ongoing global trade negotiations, particularly concerning tariffs. These policies have far-reaching domestic and international implications, including their impact on the US dollar, global markets, and the national debt. The looming July 9th deadline for sweeping tariffs highlights the critical juncture in international trade relations, eliciting diverse responses from countries worldwide.

Key takeaways from sources:

Major Fiscal Policy Shift with the “One, Big, Beautiful Bill”:
- President Trump has successfully pushed through a significant legislative package that permanently extends the 2017 tax cuts for individuals and businesses, introduces new tax breaks (including for tipped income, overtime pay, seniors, and auto loans), and expands tax breaks for parents and businesses.
- The bill also includes cuts to health and food safety net programs, notably Medicaid, by tightening enrollment, instituting work requirements, and clamping down on funding mechanisms, which the CBO estimates could leave nearly 12 million people uninsured. It also zeroes out dozens of green energy incentives.
- Fiscal Impact: Nonpartisan analysis by the Congressional Budget Office (CBO) estimates the bill will add $3.4 trillion to the national debt, bringing it to $39.6 trillion from $36.2 trillion. It projects $4.5 trillion lower tax revenues and $1.1 trillion cut in spending over 10 years. This has raised concerns about fiscal sustainability and bond market stability, with Moody’s having downgraded US debt in May citing mounting debt.
- Political Divisions: Republicans argue the bill acts as “jet fuel for the economy” and will spur economic growth. Democrats vehemently oppose it, calling it a “giveaway to the wealthy” that will hurt everyday Americans and transfer wealth from younger to older generations due to increased debt.
Looming Global Trade Tensions and the July 9th Tariff Deadline:
- The July 9th deadline is critical as it marks when sweeping tariffs are set to take effect on countries that have not secured trade agreements with the United States. This follows the end of an initial 90-day pause on tariff increases.
- Shift in US Strategy: President Trump has shifted his approach from pledging individual deals to sending letters specifying exact tariff rates to countries. Only a limited number of deals (like with Vietnam, Britain, and China framework agreements) have been reached so far.
- Country-Specific Reactions:
  - The European Union is aiming for an “agreement in principle” before the deadline, bracing for potential “tit-for-tat tariff escalation” and facing threats of up to 50% tariffs.
  - South Africa has expressed serious concern over potential 30% reciprocal tariffs that could affect 80% of its exports to the US, highlighting the US market as “vital” to its agricultural sector. Negotiations are ongoing, with a desire for continuation of 10% tariffs over 31%. Some analysts suggest export diversification (e.g., toward China) but note abandoning the US market is not viable, while others argue that crippling the SA economy would also hurt the more than 600 US companies operating there.
  - Japan is a key focus of Trump’s attention and has sent its chief trade negotiator to the US for further talks.
- Effectiveness of Tariffs: While the initial pause on tariffs may have had some positive impact, some independent economic analysts suggest that “Trump’s tariff wars have failed; many countries are no longer scared of them”, indicating a diminishing impact of these threats. Concerns about negative impacts on global economic growth are also present if extensions are not granted.

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Sources referenced:

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