In most cases, bad breath is caused by dental or gum disease and in small dogs like yours it might be plaque or tartar. Veterinarians are the best people to pinpoint the cause by conducting a physical examination or a laboratory test.
Don't know if your baby has all his teeth, he might still have some molars coming. This I do know, if you are not brushing his teeth regularly his breath will not only stink, just like ours would, but it could affect his health, especially if he develops gingivitis. Also, toy breeds easily lose the bone, because their is not much of it, & then your baby will start loosing his teeth. So, brush his teeth, he will get used to it, & it'll save you both trouble in the long run. (Owner & ex-breeder of Chihuahuas.)