Trump’s plans to slash taxes could threaten U.S. AAA rating: Fitch
U.S. President-elect Donald Trump’s plans to slash taxes could threaten the country’s triple-A credit rating over the medium term, the head of EMEA sovereign ratings at the Fitch agency said on Thursday.
“We do see increasing medium-term pressures (on the U.S. rating),” Ed Parker said at the agency’s annual credit outlook conference in London.
“Even before elections the U.S had the highest level of government debt of any triple-A country. If we add on top of that Trump’s plans to cut taxes by $6.2 trillion over the next 10 years that could add around 33 percent to U.S. government debt,” he added.
Trump will take office on Jan. 20 but some of his promised policy changes have already sparked market and economic concern, including tax cuts, a repeal of the healthcare reform enacted under President Barack Obama and a threat to slap tariffs on companies moving jobs overseas.
Parker said that in the short-term Trump did not pose a risk to the U.S. credit rating because the country continues to benefit from strengths such as the role of the dollar as the world’s predominant reserve currency.
Fitch has a stable outlook on its AAA rating on the United States. Of the other two main agencies, Moody’s also has the top rating for the No. 1 world economy but Standard and Poor’s has it one notch lower at AA+.
DOWNGRADES COMING
Other countries around the world could be in line for ratings cuts in 2017. Fitch’s negative outlooks on sovereign ratings currently outweigh positive outlooks by a factor of 6:1.
“That is a very clear signal that we see sovereign risks as on the downside and you can expect a further heavy flow of downgrades in 2017,” said Parker.
