Between Trump’s “big, beautiful tax bill” that would give trillions of dollars to the wealthiest at the expense of the workers and his on-again, off-again tariffs, the capitalist economy in the U.S. faces an uncertain future. Central to this crisis is a pending $3.8 trillion increase to the already $36.2 trillion U.S. government debt should Trump’s budget be passed.

To put this in perspective, the market value of the goods and services produced by workers in the U.S., or Gross Domestic Product (GDP), is expected to be over $30 trillion in 2025. At the end of 2024, the U.S. debt-to-GDP ratio was already 121.85%. A World Bank study predicted that countries with a debt-to-GDP ratio above 77% for a prolonged period were likely to experience significant slowdowns in economic growth. (investopedia.com)

Of particular concern is the impact on the U.S. Treasury Bonds vital for providing the money to pay for the debt. People who hold U.S. Treasury Bonds are holding U.S. debt. But what happens when the U.S. government borrows more money than it can ever pay back?

Tariff fiasco

Trump’s tariff fiasco exposed major problems with the U.S. capitalist economy. When he first announced massive tariffs on foreign imports April 2, Wall Street investors experienced an immediate tumble in stock values. Trump’s misnamed “Liberation Day” with tariffs of 10% on nearly every country in the world, to over 100% on China, caused losses in stock markets in Asia and Europe as well.

These massive proposed “taxes” on goods produced abroad were scheduled to take effect April 9, but counter tariff threats from other countries, especially China, and pushbacks from Wall Street investors caused Trump to delay their implementation until July 9. After several lawsuits challenged Trump’s exceeding the limits of an emergency powers law, on May 28 a federal court blocked the tariffs, but this ruling was temporarily set aside by another judge on May 29.

While the tariffs’ future remains in limbo, central to Trump’s agenda were his public proclamations that the U.S. could reindustrialize, despite the reality: That ship has sailed. The U.S. has run a trade deficit with the rest of the world for nearly 50 years. There has been a steady decline in the U.S. share of the world’s global production from 50% in 1950 after World War II to 25% by the 1980s. Following several decades of globalization, U.S. share of global production has fallen to 12%. (www.workers.org/2025/04/85177/)

Treasury Bond crisis

The weeks of back-and-forth over the tariffs impacted global investors’ confidence, causing the value of the dollar to plummet. After a decade of being the strongest currency globally, the U.S. dollar has fallen 7.5% since the start of 2025 against other convertible currencies. (Morningstar.com, May 19)

The economic instability caused by the tariffs was quickly followed by pushback over Trump’s budget, with proposed tax cuts that by themselves would increase the U.S. government’s deficit by $3.8 trillion between 2026 and 2034. All of this is causing concerns for purchasers of Treasury Bonds, which historically were considered a safe investment. However, financing the deficit through bonds is no longer a certainty.

For whoever holds the U.S. Treasury Bonds, their earned interest comes from holding a portion of U.S. debt. According to bipartisanpolicy.org, “Nearly $1 of every $5 in federal revenues goes toward interest on the debt.”

Projected to grow by 6.5% annually over the next 10 years, these payments would limit the government’s ability to finance mandatory spending — currently Medicare and Social Security. To make matters worse, Trump’s proposed budget’s discretionary spending includes $1 trillion a year for the Pentagon.

Worries about the U.S. government’s spiraling debt caused stocks to drop in value on May 21 after the government released the results of its latest auction of 20-year bonds, offering a yield as high as 5.047% in order to attract enough buyers to lend a total of $16 billion over 20 years.

According to bipartisanpolicy.org (April 16), increased government borrowing, with rising yields on Treasury Bonds, can crowd out private investments by about 33 cents per dollar and over time erode U.S. economic competitiveness. The higher yields on bonds can also reduce buyers’ likelihood of making other kinds of investments.

Rise of the Global South

At issue is also the declining value of the U.S. dollar in comparison to other currencies. Following the adoption of the Bretton Woods system in 1944, the U.S. dollar became the standard global currency, up to and including leading the era of globalization. But with the value of U.S. dollar dominance increasingly in question, particularly with the rise of the Global South, is the reign of the U.S. dollar ending?

Trump says he would like to return the value of the U.S. dollar to its hegemony set in Bretton Woods. But is this at all possible?

The global conflict resulting from the start of the Ukraine war in February 2022, including the sanctions on Russia by the U.S., provided the driving force behind the expansion of the financial alliance BRICS, which initially included Brazil, Russia, India, China in 2006 and South Africa in 2010. Since then, 15 other countries have formally joined BRICS, and many more are requesting membership. (infobrics.org)

Trump can sign executive orders and make proclamations about improving the U.S. economy, but just because Trump says something doesn’t make it so.