"Trump's Tariff Policy Could Worsen US Fiscal Deficit"

International credit rating agency Moody's has warned that President Donald Trump's high tariff policy could undermine the fiscal soundness and interest rate response capability of the United States.

According to the Financial Times (FT) on the 26th, Moody's diagnosed in a report the previous day that "the fiscal soundness of the United States has been deteriorating since November 2023 and is expected to continue to deteriorate for several years."

In particular, it pointed out that the economic policies of the Trump administration are the background for these concerns. Moody's assessed that "tax cuts without alternative resources, continued high tariffs, and tail risks that could cause structural shocks to the economy all have a negative impact on creditworthiness." It further pointed out that "the ability of the US government to cope with fiscal deficits and debt burdens is diminishing."

The US Congress and the federal government have recently failed to narrow their differences over ways to resolve the government fiscal deficit. Financial market experts warn that the surge in US debt could cause structural instability in the global bond market. Global bond management company PIMCO stated at the end of last year that "concerns about sustainability are causing hesitation in purchasing US long-term bonds." The US fiscal deficit for the 2023 fiscal year (as of September 30) was $1.8 trillion, an 8% increase from the previous year. Moody's predicted that "the US's ability to repay debt is relatively vulnerable compared to other high-credit-rated countries" and that "policy changes by the administration could cause structural changes in the global economic system."

Reporter Hyein Lee hey@hankyung.com