The US economy faces mounting debt concerns, with experts warning of a high level of uncertainty surrounding fiscal policy. Moody’s recent downgrade of the US credit rating serves as a reminder of the risks associated with rising debt levels.
According to IMF economist Gopinath, lower average tariff rates brought about by Trump’s truce with China and the US-UK trade deal are a positive development. However, she cautions that “very elevated” trade policy continues to impact the global economy.
The root cause of the increasing debt is the US government’s excessive spending, which outpaces revenue. White House officials attribute large deficits inherited from the Biden administration to deregulation and pro-growth policies. Despite these efforts, there is no indication that fiscal discipline will improve in the near future.
Gopinath emphasizes that the US should have a fiscal policy aimed at reducing debt-to-GDP ratios over time. The IMF economist notes that this is crucial for maintaining financial stability and ensuring long-term economic growth.
Source: https://www.axios.com/2025/05/21/us-debt-trump-tariffs-trade-policy-tax-imf