Tariffs, DOGE no match for ‘dire’ US debt: Talaria Capital

The Trump administration’s latest efforts to combat its “dire debt situation”, conflated by increased tariffs and a focus on government efficiency, have not exactly been successful and signal a “long-term structural challenge” for the US, according to Talaria Capital.

Co-CIO, Chad Padowitz, said US debt has continued on its downward trend at the same time as one of the US’ leading rating agencies, Moody’s Ratings, had downgraded its US credit rating.

“The tax cut that the Trump administration has passed would currently add about 0.9 per cent to GDP debt, so even if Elon Musk’s DOGE efficiencies were successful, in addition to the added revenue raised through higher tariffs, they wouldn’t come close to plugging this gap,” he said.

“The US essentially has a long-term problem of spending too much money relative to its tax take.

“While I don’t expect the Moody’s downgrade to have a material impact on government operations or yields, it is an indication that long term it’s unsustainable.” 

While the volatility surrounding tariffs is yet to significantly affect the economy, Padowitz said it will still act as a “headwind to future growth” with some investors already seeking out more attractive opportunities in European equities.

“The current tariff rate is around 12 per cent, which means they are hovering around the highest tariffs have been in decades,” he said.

“US interest rates remain elevated, and inflation remains sticky. Current equity valuations are pricing in a far more optimistic outcome than in the past.

“Times like this call for sound investment decisions – companies with solid leadership, strong balance sheets and stable business models.”