China News recently reported that China’s rating agency, the Dagong Global Credit Ratings, just lowered the sovereign rating of the U.S. Dollar from A- down to BBB+. The outlook for the U.S. sovereign rating was marked as negative. Dagong explained that this move was due to the fact that the U.S. capability of paying back debts significantly weakened after the newly passed tax cut bill. The U.S. government’s credit is directly associated with the amount of tax it collects, which is the primary source for backing its debts. Dagong expressed its belief that the U.S. Federal government’s income will decline due to the tax cut, while defense spending and infrastructure investment will see massive increases. The U.S. deficit is expected to climb higher in the foreseeable future. Also, the promised upcoming U.S. interest rate hikes will further worsen the situation. The Chinese government certified Dagong’s rating qualifications.
Source: China News, January 16, 2018