19/05/2025

BIZ & FINANCE MONDAY | MAY 19, 2025

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US loses last triple-A credit rating

formerly on Moody’s board. “Congress is just going to have to discipline itself, either get more revenues or spend less.” Trump is pushing lawmakers in the Republican-controlled Congress to pass a bill extending the 2017 tax cuts that were his signature first-term legislative achievement, a move that nonpartisan analysts say will add trillions to the federal government’s debt. The downgrade came as the tax bill failed to clear a key procedural hurdle on Friday, as hardline Republicans demanding deeper spending cuts blocked the measure in a rare political setback for the Republican president in Congress. Moody’s said the fiscal proposals under considerations were unlikely to lead to a sustained, multi-year reduction in deficits, and it estimated the federal debt burden would rise to about 134% of GDP by 2035, compared with 98% in 2024. “Moody’s downgrade of the United States’ credit rating should be a wake-up call to Trump and Congressional Republicans to end their reckless pursuit of their deficit-busting tax giveaway,” Senate Democratic Leader Chuck Schumer said in a statement on Friday. “Sadly, I am not holding my breath.” The cut follows a downgrade by rival Fitch, which in August 2023 also cut the US sovereign rating by one notch, citing expected fiscal deterioration and repeated down-to-the-wire debt ceiling negotiations that threaten the government’s ability to pay its bills. Fitch was the second major rating agency to

“Walmart should STOP trying to blame Tariffs as the reason for raising prices throughout the chain. Walmart made BILLIONS OF DOLLARS last year, far more than expected,” Trump said in a social media post. “Between Walmart and China they should, as is said, ‘EAT THE TARIFFS,‘ and not charge valued customers ANYTHING.” Walmart said it has always worked to keep its prices as low as possible, adding that this practice will not stop. “We’ll keep prices as low as we can for as long as we can given the reality of small retail margins,” the company said in a statement to Reuters. Walmart CEO Doug McMillon said last Thursday the retailer could not absorb all the tariff costs because of narrow retail margins. Even so, he said, the company was committed to ensuring that tariff-related costs on general merchandise, which primarily comes from China, would not drive food prices higher. Many US companies have either slashed or pulled their full-year expectations amid friction between the US and its trading partners, particularly China, as consumers curtail spending. As a bellwether of US consumer health, White House communications director Steven Cheung reacted to the downgrade via a social media post, singling out Moody’s economist, Mark Zandi, for criticism. He called Zandi a political opponent of Trump. Zandi declined to comment. Zandi is the chief economist at Moody’s Analytics, which is a separate entity from the credit ratings agency Moody’s. Since his return to the White House on Jan 20, Trump has said he would balance the budget while Treasury Secretary Scott Bessent has repeatedly said the current administration aims to lower US government funding costs. But the administration’s attempts to raise revenue and cut spending have so far failed to persuade investors. Trump’s attempts to cut spending through Elon Musk’s Department of Government Efficiency have fallen far short of its initial goals. And attempts to raise revenue through tariffs have sparked concerns about a trade war and global slowdown, roiling markets. Left unchecked, such worries could trigger a bond market rout and hinder the administration’s ability to pursue its agenda. The downgrade, which came after market close, sent yields on Treasury bonds higher, and analysts said it could give investors a pause when markets re-open for regular trading today. “It basically adds to the evidence that the United States has too much debt,” said Darrell Duffie, a Stanford finance professor who was

strip the United States of its top triple-A rating, after Standard & Poor’s did so after the 2011 debt ceiling crisis. “They have got to come up with a credible budget agreement that puts the deficit on a downward trajectory,” said Brian Bethune, an economics professor at Boston College, referring to Republican lawmakers. Investors use credit ratings to assess the risk profile of companies and governments when they raise financing in debt capital markets. Generally, the lower a borrower’s rating, the higher its financing costs. “The downgrade of the US credit rating by Moody’s is a continuation of a long trend of fiscal irresponsibility that will eventually lead to higher borrowing costs for the public and private sector in the United States,” said Spencer Hakimian, chief executive at Tolou Capital Management, a hedge fund. Long-dated Treasury yields – which rise when bond prices decline – could go higher on the back of the downgrade, said Hakimian, barring news on the economic front that could increase safe-haven demand for Treasuries. The downgrade follows heightened uncertainty in US financial markets as Trump’s decision to impose tariffs on key trade partners has over the past few weeks sparked investor fears of higher price pressures and a sharp economic slowdown. “This news comes at a time when the markets are very vulnerable and so we are likely to see a reaction,” said Jay Hatfield, CEO at Infrastructure Capital Advisers. – Reuters

WASHINGTON: Moody’s downgraded the US sovereign credit rating last week due to concerns about the nation’s growing, US$36 trillion (RM154 trillion) debt pile, in a move that could complicate President Donald Trump’s efforts to cut taxes and send ripples through global markets. Moody’s first gave the United States its pristine “Aaa” rating in 1919 and is the last of the three major credit agencies to downgrade it. The cut by one notch to “Aa1” follows a change in 2023 in the agency’s outlook on the sovereign due to wider fiscal deficits and higher interest payments. “Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” Moody’s said on Friday, as it changed its outlook on the US to “stable” from “negative”. The announcement drew criticism from people close to Trump. Stephen Moore, former senior economic adviser to Trump and an economist at Heritage Foundation, called the move “outrageous”. “If a US backed government bond isn’t triple A-asset then what is?” he told Reuters. o Moody’s cites rising debt and interest costs for downgrade Fed plans to cut workforce by 10% in next ‘couple of years’ WASHINGTON: US Federal Reserve chairman Jerome Powell told staff last week that the bank plans to cut its workforce by around 10% in“the next couple of years”, according to a memo seen by AFP. The bank’s announcement follows US President Donald Trump’s attempt to dramatically reduce headcount in the federal government, a move that has been spearheaded by the Elon Musk-run Department of Government Efficiency. “The Fed is absurdly overstaffed,” Musk wrote in a social media post earlier this year. The Fed is an independent agency which does not rely on Congress for its funding, but instead makes money from interest on securities and fees charged to the banks it oversees. “Experience here and elsewhere shows that it is healthy for any organisation to periodically take a fresh look at its staffing and resources,” Powell told staff in the memo, first reported by Bloomberg News. The plans will include a “voluntary” deferred resignation programme for eligible employees at the Federal Reserve Board in Washington, he said. The Fed employed 23,950 people across the country in 2023, according to its most recent annual report, including 3,000 employees at the Board, and over 20,000 staff at its 12 reserve banks dotted across the country. Using that figure, a 10% cut in headcount would translate to a loss of just under 2,400 people. Powell said he has directed the leadership of the Fed “to find incremental ways to consolidate functions where appropriate, modernise some business practices, and ensure that we are right-sized and able to meet our statutory mission”. The deferred resignation programme would “provide new professional growth opportunities for our staff and help us remain well-prepared to carry out our important responsibilities in the years to come”, he added. – AFP

Trump tells Walmart to ‘eat the tariffs’ WASHINGTON: U.S. President Donald Trump said on Saturday that Walmart should “eat the tariffs” instead of blaming duties imposed by his administration on imported goods for the retailer’s increased prices. His comments were in response to the world’s largest retailer saying last week it would have to start raising prices later this month due to high tariffs.

A Walmart Supercentre in Austin, Texas. – AFPPIC

to keep prices low. Every week, 255 million people shop in its stores or place orders online around the world, and 90% of the US population lives within 16km of a Walmart. – Reuters

Walmart’s explicit statement about the impact of tariffs is a signpost for how the trade war is affecting the retail sector. Walmart is noted for its ability to manage costs more aggressively than other companies

BT nears deal to sell TNT Sports stake to Warner Bros Discovery: FT LONDON: BT is in advanced talks to sell its 50% stake in British broadcaster TNT Sports to US joint venture partner Warner Bros Discovery, the Financial Times reported on Saturday. represented on the venture’s board. A deal would come at a time when media companies are exploring options for their struggling cable TV businesses and sharpening the focus on their faster-growing streaming and studios divisions. out BT’s stake before the end of 2026, the FT said, adding that a deal would end BT’s involvement in sports broadcasting after more than a decade. WBD and TNT declined to comment on the report, while BT did not immediately respond to requests for comment outside business hours. In 2022, the British telecom firm agreed to a sports broadcasting tie-up with Discovery in which both companies were equally WBD plans to launch its HBO Max service in Britain, Ireland, Italy and Germany in 2026. – Reuters A deal could be announced as early as next week, the newspaper reported, citing sources it did not name. BT is set to report full-year results next week. Warner Bros Discovery has an option to buy