"The $300 Billion Secret: Why Trump's Tariffs Might Actually Save America's Debt Crisis"

KR Opinion

As we enter Wednesday's trading session, Trump's overnight threat of a 50% duty on copper imports has metal traders scrambling, though the broader market reaction remains surprisingly muted. The atmosphere can best be described as calm but cautious, continuing a pattern I noted in last night's report, where market traders appear to have become almost entirely numb to dramatic announcements. This non-responsive behavior seems to stem from the constant stream of mixed messaging we've witnessed since April.

The copper situation took an interesting turn with news that a major operation will be established here in Arizona, which sits at the heart of America's copper country. This announcement likely reflects the understanding that the United States is nearing the production of a significant amount of its copper. Freeport-McMoran, one of the largest copper producers, operates in the region alongside many other copper claims and newly announced operations. Several large deposits are ready to start production, potentially reshaping the domestic supply landscape.

Markets experienced a modest gain overnight, although the movement remains moderate. We are still seeing strong support levels beneath the markets, even as I often describe it as a narrowing of volatility. This pattern usually appears as a warning sign before market declines, forming a setup that needs close watch. Several indicators are starting to weaken, and while an upward trend still seems likely from a technical perspective, this trend is becoming increasingly fragile each day.

Looking ahead to tomorrow, we're unlikely to see significant market-moving news unless the European Union makes an announcement or we see progress on an EU trade deal. Otherwise, Wednesday should remain relatively quiet. The most important data release is scheduled for Thursday, featuring the weekly jobless claims and continuing claims figures, which could impact the market. I'll analyze the emerging weakness I'm observing in tomorrow evening's report.

Beyond copper tariffs, Trump has also floated the possibility of a 200% tariff on pharmaceuticals, although not for immediate implementation. This appears to be aimed at a later time in the year as part of an effort to align U.S. pharmaceutical prices more closely with those in other countries. We'll also receive the minutes from the June Federal Open Market Committee meeting. While I don't expect these minutes to move markets significantly, they could provide at least some brief intraday momentum.

Markets are finally recognizing that tariffs have little to no effect on inflation and similarly limited impact on economic expectations. Scott Bessent recently explained how the government has already collected over $100 billion in tariffs this year, with expectations to surpass $300 billion. For all the doomayers concerned about debt, I've included the calculations in my GDP model, which I'll link below for your review and experimentation.

Click Here for an Interactive Model for the Future GDP to Debt Ratios

When you work through various scenarios in the model, throwing everything at it except truly catastrophic economic data, such as sub-1.5% growth in expenditures, you'll discover numerous possibilities. Most scenarios still suggest that the debt-to-GDP ratio will continue its decline. My estimates indicate that this decline will fall below the 100-to-1 threshold sometime between 2031 and 2033, marking a significant milestone in fiscal improvement.

Economic Releases for the Week of July 07 - 11

Jul 08

• 06:00 ET: NFIB Small Business Optimism For: Jun | Trading Impact: Low | KR Forecast: NA | KR Cons: NA | Prior: 98.8

• 15:00 ET: Consumer Credit For: May | Trading Impact: Low | KR Forecast: $8.6B | KR Cons: $12.2B | Prior: $17.9B

Jul 09

• 07:00 ET: MBA Mortgage Applications Index For: 07/05 | Trading Impact: Low | KR Forecast: NA | KR Cons: NA | Prior: 2.7%

• 10:00 ET: Wholesale Inventories For: May | Trading Impact: Low | KR Forecast: 0.0% | KR Cons: -0.3% | Prior: 0.2%

• 10:30 ET: EIA Crude Oil Inventories For: 07/05 | Trading Impact: High | KR Forecast: NA | KR Cons: NA | Prior: +3.845M

Jul 10

• 08:30 ET: Initial Claims For: 07/05 | Trading Impact: High | KR Forecast: 242K | KR Cons: 245K | Prior: 233K

• 08:30 ET: Continuing Claims For: 06/28 | Trading Impact: High | KR Forecast: NA | KR Cons: NA | Prior: 1964K

• 10:30 ET: EIA Natural Gas Inventories For: 07/05 | Trading Impact: Low | KR Forecast: NA | KR Cons: NA | Prior: +55 bcf

Jul 11

• 14:00 ET: Treasury Budget For: Jun | Trading Impact: Medium | KR Forecast: -$225.0B | KR Cons: -$257.5B | Prior: -$316.0B

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