As the U.S. national debt reaches an all-time high, surging interest payments consume a massive share of federal revenue, forcing the government to dedicate more resources to servicing past debt and threatening to crowd out critical public investments, said an American professor of finance and macroeconomics.
The U.S. federal government on Tuesday saw its total public debt topping 40 trillion U.S. dollars, according to a Treasury Department report issued on Wednesday. That means just paying the interest costs American taxpayers more than a trillion dollars a year, making it the government's second biggest expense after the Social Security retirement program.
Based on the current data, the U.S. national debt will nearly double in the next ten years.
Phillip Braun, clinical professor of finance at Northwestern University's Kellogg School of Management, said such a large dept stops being an alarming number but becomes an actual economic crisis.
"I think the United States is at that point now based on what happened in the bond market last week. And the government is having that harder and harder time being able to sell this debt. People view it as becoming more risky across time. And so they demand higher yields on the bonds that the U.S. government issues. And so this is a very strong upper pressure on long-term interest rates, 10/20/30-year U.S. Treasury bonds," he said in an interview with China Global Television Network (CGTN).
Rising bond yields translate into higher borrowing costs across mortgages, auto loans, and corporate debt, with ripple effects that touch every American household. Braun laid out the arithmetic in stark terms.
"The debt is so large, the interest payments the U.S. government has to make in the debt, that's quite considerable and it constitutes around 20 percent of the budget currently. So we're around 1.2 trillion dollars. That's the paying interest this year. And so that's going to crowd out other government expenditures. And, with the Republicans in office, it's going to crowd out the social programs and things like that. So, it's not a good situation," he said.
Rising interest costs on national debt to crowd out U.S. social programs: expert
Canadian businesses are adapting to the impact of the trade dispute with the United States, with many trying to reduce their dependence on American imports and diversify their suppliers.
The United States imposed a 50-percent tariff on 20 billion U.S. dollars' worth of Canadian goods on Saturday that came into effect just after midnight (0400 GMT), following the two countries' failure to reach a trade deal on Friday.
Canadian Prime Minister Mark Carney on Saturday announced Ottawa's "dollar-for-dollar" retaliatory tariffs against 20 billion U.S. dollars' worth of American goods would take effect on Sept 8.
Canadians are trying to come to terms with a new reality of 50 percent tariffs, which not only hit mass-produced goods but also original artwork.
"So all the original art that we sell and showcase, anything shipped to the States will be under the 50 percent," said Nancy Johns, owner of Nancy Johns Gallery and Framing.
Her gallery has been operating in Windsor, Ontario, just across the border from Detroit, for almost 20 years. On her online store, she has posted a message warning U.S. customers about the 50 percent tariffs they now face.
Johns said she was not surprised that trade talks broke down in the end, adding that she misses the stronger relationship Canada and the U.S. once had.
"I've always thought of Detroit as part of Windsor. We're interchangeable, really. So many friends, family, work stateside and they come over and they're like, we're just sad. We're sad that our countries are fighting," she said.
U.S. Trade Representative Jamieson Greer said Canada refused what he said was a good deal that included tariff cuts on steel, automobiles and lumber.
But in a statement released late Friday, Carney said he suspended the talks because Washington introduced last-minute changes that were "unfair, uneconomic, and called into question the reliability of any deal," even though the two sides had appeared close to a mutually beneficial agreement earlier in the week.
Some experts have said the prime minister's decision was difficult but necessary.
Canada is now the first country ever subjected to tariffs under Section 338 of the 1930 U.S. Tariff Act.
In an e-mail to CGTN, the head of one Canadian policy and research group says countries globally are watching how other governments react to growing U.S. economic pressure.
Vina Nadjibulla, founder and CEO of the Center for Strategic Statecraft, wrote that Canada's management of this confrontation -- whether it can absorb the economic costs, preserve domestic unity, defend its policy, autonomy and successfully diversify abroad -- will shape how Canada is seen around the world.
Many Canadian small business owners are ready to pick up the fight. In Toronto, boutique owner Daphne Nissani has been posting Instagram stories to promote her Canadian-brand clothing products.
She said that when there were talks of the first wave of tariffs from the Trump administration last year, she decided to pivot her business and has reduced American products by around 60 percent. She is also encouraging customers to buy more Canadian products.
"I wanted to minimize the dependency on the American brands that I was carrying in the store. So I slowly started to decrease it, change it up a bit. And in that time, I ended up finding more Canadian content, European content, and so now I have that that's incorporated into the store," said Nissani, owner of Boa Boutique.
The Canadian government has said there will be additional measures of support for businesses and workers affected by the U.S. tariffs, with further details expected in the coming days.
Canadian businesses seek to reduce dependence on US imports, diversify suppliers
