Important warning from Fitch to the USA: Federal budget deficit may increase

In the statement made by Fitch, it was noted that the victory of the Republicans in the US presidential elections shows that the debt limit negotiations to be held in Congress in January will be resolved without any significant conflict.

The statement pointed out that the tax cuts approved in 2017 will probably be extended next year, and said, “Beyond these extensions, additional new tax reduction measures will increase the already large federal deficit unless compensated by spending cuts and customs revenues.” evaluation was made.

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The statement stated that Donald Trump’s victory, together with the possibility of Republicans controlling both houses of Congress, increased the potential for Trump’s promises to come into force, and reminded that among the main promises were increasing tariffs and immigration restrictions and extending tax cuts.IT INDICATES ADDITIONAL RISK

The statement stated that Trump’s other tax-related promises point to additional risks for the US’s deficits in 2025 and 2026, and warned that they could contribute to deficit pressures.

It was noted in the statement that broad-based tariffs and spending cuts promised by Trump could alleviate some of the revenue lost from income taxes, but it was stated that the tariffs would come at the expense of reduced economic growth and additional inflationary pressures, especially if immigration policies are significantly tightened.

In the statement, it was stated that general government debt is the main driving force of the US credit rating, and that a significant increase in debt relative to gross domestic product would negatively affect the rating.

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In the statement, it was emphasized that the management is another important factor for the country’s rating, and it was noted that the rating may be negatively affected if policy consistency and reliability decrease in a way that weakens the reserve currency status of the dollar and limits the financing flexibility of the government.