emerging
US Fiscal Deterioration
Trump's proposed policies, while potentially growth-stimulating, are projected to significantly worsen the US fiscal deficit, posing a long-term risk to the economy.
Timeframe
long-term
Subcategories
Impact areas
Detailed Analysis
While Trump's policies aim to boost economic growth, they are projected to exacerbate the US fiscal deficit. "Trump’s policies will likely see the fiscal deficit worsen by US$7.5 trillion by 2035, putting upward pressure on the back-end of the curve." This increased borrowing could lead to higher interest rates, potentially offsetting some of the growth benefits of the tax cuts. The long-term implications of this fiscal expansion are a key concern for the sustainability of the US economy. This fiscal deterioration could also impact investor confidence and lead to increased volatility in financial markets.
Context Signals
Historical impact of large fiscal deficits
Potential for crowding out private investment
Global demand for US government debt
Edge
Investors may seek alternative investments that offer protection against inflation and rising interest rates.
The increasing debt burden could limit the government's ability to respond to future economic shocks.
The potential for higher interest rates could create opportunities for investors in fixed-income securities.
