U.S. Fiscal Health Risks Post-Trump Election

NEW YORK (Reuters) – The U.S. fiscal health faces increased risks following the election of Republican Donald Trump as President, as per rating agency Moody's (NYSE:MCO).

U.S. budget deficits and government debt levels are projected to surge under either presidential candidate from the Nov. 5 election. However, Democrat Kamala Harris was expected to incur less debt than Trump.

Trump's victory has triggered a selloff in government bonds due to aspects of his economic plans, including tax cuts and tariffs, which might lead to faster growth, higher inflation, and wider budget deficits.

As of Friday, Trump's Republicans are set to potentially gain control of both chambers of Congress, allowing for quicker implementation of new policies.

Moody's noted that without measures to limit fiscal deficits, the federal government’s declining fiscal strength could increasingly impact the U.S. sovereign credit profile.

The agency stated, "Given the fiscal policies Trump promised while campaigning, and the high likelihood of their passage due to the changing Congress composition, risks to U.S. fiscal strength have escalated."

Moody's, the last major rating agency to hold a top rating for the U.S. government, downgraded its outlook on its triple-A credit rating to "negative" from "stable" in November last year. This outlook typically resolves within 18 to 24 months.

"With Republican control of the Legislature and the Executive, policy shifts could be implemented swiftly," the agency said, increasing risks of significant changes in tax, trade, immigration, and climate policies that may particularly impact manufacturing, technology, and retail industries.