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The Moody’s credit rating group warned of US fiscal prospects, saying that President Donald Trump’s trade tariffs could prevent the country’s ability to cope with a growing bunch of debt and higher interest rates.
The evaluation agency said on Tuesday that the US “fiscal power on the way to a continuous perennial crash” after already “worsened” because it assigned a negative look to the top American AAA credit rating in November 2023.
While Moody’s They emphasized the “extraordinary” economic resistance of the USA – the role of dollars and the treasury market as the backlog of the global financial system, its analysts also warned on Tuesday that other Trump administration policies – including caring tariffs and plans for reducing taxes – could cause more damage than good for government revenues.
“A potential negative loan impact of permanent high tariffs, unhinered tax reductions and significant rampi ramps for economy They diminished the odds that these terrible forces would continue to compensate for the spread of fiscal deficits and declining the accessibility of debt, “Moody’s said.
“In fact, fiscal weakening is likely to last even in very favorable economic and financial scenarios,” they added.
Moody’s warning comes in the midst of an angry discussion of Capitol Hill and inside Trump’s administration on how to now place on a sustainable fiscal path. Analysts and investors warned that the American sudden growing debt and deficit could ultimately alleviate the treasure demand for the treasure of the global financial system.
Pimco, one of the biggest bond managers in the world, said at the end of last year that they had made “questions of sustainability” hesitant to buy long -term treasury. The federal budget deficit reached $ 1.8 for a fiscal year that ended on September 30, which is 8 percent compared to the previous year.
When Moody’s lowered his prospects On the US credit rating, negatively more than two years ago, he pointed out the abruptly higher costs of debt service and a “implanted political polarization”. The US credit rating is carefully observed because it plays a critical role in the accessibility of debt in the country – with higher ratings and positive prospects that are usually translated into lower borrowing costs.
Moody’s said on Tuesday that “debt accessibility remains materially weaker than with other sovereign and highly rated AAAs”, with even the most positive economic and financial scenarios that emphasize “the growing risk of decaying in American fiscal strength will no longer be fully compensated for its extraordinary economic power.”
The evaluation agency has admitted that she expects the world’s largest economy “to remain strong and resistant”. However, his analysts added that “an evolutionary agenda of US government policy on trade, immigration, taxes, federal consumption and regulations could reshape to the US and the global economy with significant long-term consequences.”
While Trump has repeatedly stated his tendency to lower US borrowing costs, Fed last week held interest rates of stable Ranging from 4.25 percent to 4.5 percent, as its policy creators envisaged approximately two quarter points during 2025. Moody’s said he envisaged a federal funding rate from 3.75 to 4 percent by the end of the year.
