To implement his $1 trillion dollar infrastructure plan, President Trump needs low rates, even though the Fed’s rate hikes will strengthen dollar. That means new uncertainty worldwide.

In his Crippled America (2015), Trump argued that “our airports, bridges, water tunnels, power grids, rail systems—our nation’s entire infrastructure is crumbling, and we aren’t doing anything about it.”

The problem is that as Trump would like to begin his $1 trillion dollar infrastructure plan, the Fed is about to accelerate rate hikes. Trump needs low rates and weak dollar. Yellen is raising rates and strengthening dollar. Something has got to give in.

Trump’s $1 trillion infrastructure plan

During his campaign, President Trump argued that US economic growth and job creation rests on the combination of income tax cuts, deregulation, trade protectionism and spending for defense and infrastructure. His proposal to boost defense-related spending by $54 billion suggests that he is about to move ahead.

Trump’s newly-confirmed secretary of commerce, billionaire Wilbur Ross, and the head of National Industrial Policy Commission, Peter Navarro, believe that increased economic growth would be stimulated by income tax cuts and additional military and infrastructure spending, which would offset increased budget deficits.

While there is a longstanding bipartisan agreement on the need for the modernization of the US infrastructure, there has been little consensus about how to go about it. During his campaign, Trump proposed to spend $800 to $1 trillion to repair and improve the U.S. infrastructure. To raise capital, he hopes to create an infrastructure fund supported by government bonds that investors and citizens could purchase, similar to Build America Bonds.

Nevertheless, realistic analysis of the Trump plan suggests it would cause the national debt to increase by almost $10 trillion over a decade; on top of the current $20 trillion which already accounts for 107 percent of the US GDP. That would translate to a debt tsunami.