Health Risks for U.S. Fiscal Stability Rise After Trump's Election, According to Moody's
(NEW YORK) - The fiscal situation in the United States is more threatened following the election of Republican Donald Trump to the presidency, largely due to the likely makeup of Congress, according to ratings agency Moody's. Budget deficits and federal debt in the U.S. were expected to rise regardless of who won the November 5 elections, according to various projections, but there was a belief that Democrat Kamala Harris would incur less debt than Trump.
Trump's victory has triggered a massive sell-off of government bonds this week, as key elements of his economic proposals, like tax cuts and tariffs, are expected to encourage growth, though they could also lead to higher inflation and wider deficits. Trump's Republicans appeared poised to dominate both chambers of Congress, potentially facilitating the swift implementation of new policies. "Without measures to rein in fiscal deficits, the deterioration of the federal government's fiscal situation will begin to negatively influence the sovereign credit profile of the United States," Moody's stated in a report on November 7. "Considering the fiscal proposals Trump presented during his campaign, and the high likelihood they will be enacted due to the new composition of Congress, the risks to the fiscal health of the United States have increased," they added. Moody's is the latest of the three major rating agencies that still maintains a top rating for the U.S. government. Last November, the agency changed its outlook on the U.S. AAA credit rating from "stable" to "negative." The risk of "potentially abrupt and radical changes in fiscal, trade, immigration, and environmental policies, which could especially impact the manufacturing, technology, and retail sectors," was highlighted due to Republican control of both the White House and Congress.
It is crucial to observe how these changes could influence not only the economy of the United States but also that of Mexico, given the interconnectedness between the two. The fiscal and trade decisions made could impact bilateral trade and investment in the country. Staying informed and strategically planning could be key to mitigating any potential negative effects.
