Chad Padowitz

As the Trump Administration passes tax cuts amid an already dire US debt situation, increased tariffs and government efficiencies won’t alter the debt trajectory significantly, posing a long-term structural challenge, Chad Padowitz, co-CIO at Talaria Capital says.  

“US debt has got progressively worse, and that trend is certainly not slowing down fast enough, if at all,” Mr Padowitz said.  

“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. 

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

Mr Padowitz pointed to Moody’s Ratings that has recently downgraded the US credit rating, citing an inability of the nation to address large and growing deficits. 

“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.” 

Mr Padowitz said fluctuating tariffs over the course of the past two months haven’t yet had a significant impact on the economy, but will be a headwind to future growth. 

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

Mr Padowitz said as US markets rally despite no corresponding earnings upgrades, European equites seem more attractively priced compared to their US counterparts.  

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

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

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