The U.S. currently runs a surplus on investment income of about 1 percent of GDP, as the income on U.S. equity investment abroad (inflated by tax arbitrage) exceeds the interest the U.S. pays on its external debt. That surplus could shrink significantly as interest rates rise.
Warning: long, wonky, and not for the fainthearted.
I try to assess how the international reforms will impact where firms book profits and thus the measured trade and income balance, not just the mechanical impact of a higher fiscal deficit.
Giving macroeconomic policy advice to a country that saves 46 percent of its GDP is hard. Imprudent domestic policies help limit large external (trade) imbalances, and more prudent domestic policies could result in a return to large external imbalances. Policy changes to reduce national savings are critical.