International Monetary Fund First Deputy Managing Director Gita Gopinath said US fiscal deficits are too large and the country needs to tackle its “ever-increasing” debt burden, according to an interview published by the Financial Times on Wednesday.
Gopinath told the FT that the US was still impacted by “very elevated” trade policy uncertainty despite positive developments such as President Donald Trump’s administration rolling back tariffs on China and striking a US-UK economic deal.
In April, the IMF slashed its US growth forecast along with most other countries over the impact of US tariffs, while warning that further trade tensions would slow growth further.
“It is absolutely a positive to have lower average tariff rates than the ones we assumed in but there is a very high level of uncertainty, and we have to see what the new rates will be,” Gopinath told the FT.
The comments came as Trump is proposing to extend tax cuts passed in his first term in 2017 and to add new tax breaks.
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Moody’s also downgraded the US sovereign credit rating last week due to concerns about the nation’s growing, $36 trillion debt pile.
The ratings agency cited the failure of successive US administrations and Congress to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs.
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