Sri Lanka, April 9 -- Tariff revenues will help narrow the US budget deficit in 2025, but the hit to economic growth and additional tax cuts are likely to limit the size of any lasting fiscal benefit, Fitch Ratings says. Stabilizing US debt/GDP will be challenging as long as long-term spending pressures remain unaddressed.
The tariffs announced on April 2 raise the US Effective Tariff Rate (ETR) to about 25%, compared with the already sharp increase to 18% assumed in Fitch's Global Economic Outlook for March 2025. It remains to be seen whether product-specific exemptions, mostly covering pharmaceuticals and semiconductors, are maintained, and if retaliatory measures see trade tensions escalate further.
The magnitude of the ETR increase fr...