Fitch Ratings: US Tariffs Unlikely to Solve Fiscal Issues Despite Revenue Boost

Fitch Ratings suggests that while new tariffs will increase US revenue in 2025, they are unlikely to resolve underlying fiscal problems. The ratings firm anticipates that the positive revenue impact will be offset by slower economic growth and potential tax cuts. The tariffs, which raise the US Effective Tariff Rate (ETR) to approximately 25%, are expected to generate significant revenue this year. However, Fitch warns that these tariffs also increase the risk of recession and limit the Federal Reserve's ability to lower interest rates due to anticipated price shocks. Fitch also projects that any revenue gains from tariffs will likely be used for additional tax cuts, such as those proposed by President Trump, including corporate tax reductions and exemptions for social security benefits. The report concludes that long-term spending pressures and uncertain prospects for expenditure reductions will continue to challenge US debt stabilization.