IMF urges US to curb fiscal deficit - Trump's policies add uncertainty to financial markets
The International Monetary Fund has urged the US to curb its fiscal deficit and tackle its rising debt. Trump's tax cut plans and trade uncertainty are adding to the pressure on the US economy.
The Deputy Managing Director of the International Monetary Fund, Gita Gopinath, said that the US fiscal deficit is too large and the country must deal with the "ever-increasing" debt burden, according to an interview published by the Financial Times.
Gopinath stressed that the US was still affected by "very high" trade policy uncertainty, despite positive developments, such as the Trump administration's removal of tariffs on China and the reaching of a US-UK economic agreement.
In April, the IMF lowered its growth forecast for the United States, as it has for many other countries, due to the impact of US tariffs, while warning that further trade tensions would further slow the expansion.
"It is absolutely positive to have lower average tariff rates than what we assumed in April... but there is a very high level of uncertainty and we need to see what the new rates will be," Gopinath said.
The comments came as Trump is proposing to extend tax cuts passed in his first term into 2017 and add new tax breaks. Moody's also downgraded the U.S. sovereign credit rating last week over concerns about the country's growing $36 trillion debt.
The administration says the tax cuts will pay for themselves with higher growth, but neither Moody's nor financial markets are convinced. The ratings agency said last week that the proposed legislation would increase the U.S. deficit from 6.4 percent last year to about 9 percent by 2035.
Moody's also cited the failure of successive US administrations and Congress to reverse the trend of large annual fiscal deficits and rising interest costs.
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