Moody’s has warned that President Trump’s proposed tariff policies could undermine the United States’ economic strength and deepen concerns about the federal budget deficit.
The credit-rating agency expects higher tariffs to weigh on business investment and consumer confidence, and it warns they could make it harder for the Federal Reserve to justify cutting interest rates. Those combined effects, Moody’s says, would slow growth and raise borrowing costs for the public and private sectors.
Moody’s also highlighted that the U.S. government’s ability to service its debt is much weaker than in past decades. The agency projects that, without corrective fiscal action, the federal deficit could widen substantially over the next ten years and reach roughly 8.5% of GDP. That larger structural gap would increase the nation’s vulnerability to economic shocks and limit policy flexibility.
Although the dollar retains its special status as the global reserve currency — a factor that provides some buffer against immediate market pressure — Moody’s cautions that a trend of fiscal weakening is likely to continue unless policymakers take decisive steps. The agency further noted that planned cost-cutting efforts, such as the DOGE program cited in some discussions, are unlikely to produce major savings quickly enough to offset rising deficits.
In short, Moody’s assessment emphasizes that tariffs and weaker fiscal discipline could combine to lower investment and consumer confidence, constrain monetary policy options, and amplify long-term debt risks. The agency’s analysis underscores the importance of prudent fiscal management to preserve economic resilience and maintain favorable borrowing conditions over time.