Fitch Ratings warned that new tax cuts in the U.S. could increase the budget deficit.

The international credit rating agency Fitch Ratings reported that new tax cuts in the U.S. could increase the federal budget deficit if not offset by spending cuts and tariff revenues.

In a statement from Fitch, it was noted that the victory of the Republicans in the U.S. presidential elections indicated that the debt ceiling discussions in Congress scheduled for January would be resolved without significant contention.

The statement pointed out that the tax cuts approved in 2017 are likely to be extended next year, stating, "Beyond these extensions, any additional new tax cut measures will increase the already large federal deficit unless offset by spending cuts and customs revenues."

TRUMP'S PROMISES POSE RISKS

The statement mentioned that Donald Trump's victory, along with the possibility of Republicans controlling both chambers of Congress, increases the potential for Trump's promises to be implemented, recalling that key promises include increasing tariffs and immigration restrictions as well as extending tax cuts.

The statement indicated that Trump's other tax-related promises signal additional risks for the U.S. deficits in 2025 and 2026, warning that they could contribute to deficit pressures.

It was noted in the statement that broad-based tariffs and spending cuts promised by Trump could alleviate some of the revenue losses from income taxes; however, it was expressed that tariffs would come at the cost of reduced economic growth and additional inflationary pressures, especially if immigration policies are significantly tightened.

U.S. CREDIT RATING MAY FALL

The statement indicated that the general government debt is a key driving force behind the U.S. credit rating, and a significant increase in debt relative to gross domestic product would negatively impact the rating.

It was emphasized that the administration is another important factor for the country's rating, noting that if policy consistency and reliability decrease to the extent that it undermines the dollar's status as a reserve currency and limits the government's financing flexibility, the rating could be negatively affected.