Impact of Biden Budget on Trade Policy


The newly released budget from the Biden administration calls for $17 trillion in federal borrowing from 2024 to 2033.

Much of this deficit spending will be financed by foreign investment.

Currently, roughly one-third of federal debt is held by foreign investors. If that rate applies to future deficits, then $5.63 trillion of the new U.S. debt incurred over the next 10 years will be financed by foreign investors, an average of $563 billion per year.

That represents up to $563 billion per year in foreign dollars that might be used to purchase U.S. goods and services, instead being used to purchase U.S. Treasury securities.

The problem is that instead of embracing the benefits of this foreign investment or taking responsibility for borrowing trillions of dollars from foreigners that might otherwise have been used to purchase U.S. exports, history suggests that politicians are more likely to blame “unfair” foreign trade barriers for inflated U.S. trade deficits. Irresponsible U.S. fiscal policy will continue to contribute to calls for destructive, protectionist trade policies.