Yes its a market, a smaller trade deficit would mean fewer buyers, this would lead to higher interest rates on US debt and higher interest rate could put pressure on congress to reduce spending.
This chain of logic is wrong, right out of the gate ...
Do you understand what trade deficit/surplus figures actually represent?
Trade deficit/surplus figures only tell you the
relative difference between the
net values of goods and services bought and sold. They imply nothing at all about the numbers of buyers or sellers involved. IOW: A smaller trade deficit would not mean fewer buyers. The two have
nothing to do with one another.
To illustrate:
Scenario 1: Country A sells $30,000,000 worth of goods and services to Country B and buys $10,000,000 worth of goods and services from Country B. Country B has a so-called trade "deficit" of $20,000,000 with Country A.
Scenario 2: Country A sells $100,000,000 worth of goods and services to Country B and buys $90,000,000 worth of goods and services from Country B. Country B has a so-called trade "deficit" of $10,000,000 with Country A.
Note that Country B's trade "deficit" is smaller in Scenario 2 than it is in Scenario 1. But given the values involved in each scenario ($30,000,000 & $10,000,000 vs. $100,000,000 & $90,000,000), why should we expect that Scenario 2 involves fewer buyers?
(Also, interest rates do not depend on the number of buyers or sellers involved in some particular trade deficit/surplus scenario. They depend on the temporally-sensitive marginal value of money to loaners and borrowers.)
Being a 70% consumer economy, US producers and exporters are almost non-existent already so if foreign companies don't buy US debt, there's not a lot of US goods they would then use their US dollars on. They would be more likely to enter the currency exchange market and sell US dollars, and buy a different currency. This could cause a dollar crisis and result in high inflation.
There are these things called the Laws of Supply and Demand ... perhaps you've heard of them ... ?
(And I'm not even going to try to "decircularize" an argument that essentially boils down to, "We have a trade deficit because we export so little, and we export so little because we have a trade deficit ...")
Does it matter economically if an export is a good or service? Is one good and one bad for the economy? Does it matter if I get paid for cutting a person's hair or for putting a nut on the end of a widget all day long? Either way, I got paid to do it.
It depends on how many haircuts and nutted widgets are actually wanted on the market (as opposed to how many are wanted by politicians and economic regulators). Being paid to do unproductive work (such as putting nuts on widgets that no one wants to buy unless they're subsidized - or digging holes and filling them right back up again) is not good for the economy, no matter how much you might get paid to do it.
