I had a similar analyses, but this coming from most respected business paper should have more weight.
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Markets are trying to figure out the implications of upending this system. Here are four:
More expensive stuff, and less choice of stuff. Increasing saving means reducing consumption. The tariffs amount to the largest tax increase in decades, which counts as government “saving”—as well as pushing up the price for almost everything imported.
Higher interest rates. The capital inflows that offset the trade deficit help fund a big chunk of federal government borrowing. Slash the trade deficit and the net inflow of foreign money dries up. Bond yields will need to rise to attract domestic savers to buy Treasurys instead of stocks or corporate bonds, which will hit share prices and raise the cost of borrowing for companies.
Lower stock prices. Only a small chunk of foreign investments goes into building factories. If there were more foreign direct investment, it could finance at least some of the reconstruction of manufacturing. But we’ve assumed Trump succeeds in shrinking the trade and current-account deficits, so there will be less foreign money coming in (remember: balance). So more foreign factory building means less foreign buying of stocks and bonds, so lower stock prices.
A weaker dollar. In economic theory the dollar is the variable that moves when savings and investment don’t balance. If the U.S. saves too little to cover its investment, the dollar should weaken to make U.S. investments more attractive to foreigners.
In practice the dollar has been in demand for foreign reserves and for use in trade, as well as a safe place to stash the world’s savings. All three are now being questioned: reserve holders worry they could be cut off from their reserves the way Russia was, trade is likely to shrink thanks to tariffs, and investors are worried that U.S. law might no longer be the reliable protector of their assets.
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This is the most important part, and the full article under paywall can be found here:
https://www.wsj.com/finance/investing/who-will-pay-the-price-for-trumps-economic-goals-37a7df15?st=8oqUME&reflink=article_copyURL_share