Since his inauguration on January 20, 2025, President Trump has wasted no time pursuing his ambitious agenda. Through a flurry of executive orders, he has introduced sweeping initiatives, from revitalizing American energy production to establishing an External Revenue framework. While these measures reflect bold promises to overhaul the economy, they have also raised concerns among credit rating agencies responsible for assessing the United States’ creditworthiness.
Chief among these concerns is whether these policies will alleviate the already precarious fiscal challenges facing the United States. National debt levels continue to climb, and critiques of the administration’s tax cuts point to potential risks for federal revenue. Fears about unpredictable trade policies and their impact on global relations also loom. Analysts warn that the protectionist measures meant to bring jobs back to America could trigger a downturn in the country’s export-driven economic growth.
“From a U.S. macro and credit perspective, increasingly protectionist trade policies and subsequent international responses will likely result in inflationary pressures,” noted the credit agency Standard & Poor’s (S&P) just days after Trump took office. Moody’s has echoed these concerns, stating that the implementation of the proposed policies could reignite inflationary pressures and ultimately lead to higher borrowing costs.
With anxieties surrounding the upcoming 2025 Fitch credit rating review and Moody’s negative outlook for the U.S., speculation abounds as to whether Trump’s policies will be able to maintain its last triple-A rating. While optimism remains high that Trump’s new economic agenda will usher in a new era of booming growth, top credit rating agencies are urging caution. As President Trump’s narrative of “America First” continues to shape policy decisions, the question remains: Will the administration’s assertive agenda win the confidence of global credit agencies, or will the nation’s financial standing suffer further blows?
Two Historic Blows to U.S. Credit Worthiness
As one of the globally recognized “Big Three” credit agencies, Fitch’s August 2023 downgrade of the U.S. credit rating from AAA to AA+ sparked widespread concerns about the nation’s financial health. Following S&P’s downgrade in 2011, this was only the second time in history that the U.S. lost its pristine credit rating. While unsurprising to many, given the country’s economic struggles, Fitch’s decision added a new level of urgency to addressing the nation’s fiscal challenges.
In its 2023 report, the agency highlighted its concerns about “the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers.” Central to these governance concerns is the repeated political brinkmanship over the debt ceiling—episodes Fitch explicitly cited as eroding trust in Washington’s fiscal management.
S&P’s downgrading of the U.S. in 2011 was largely due to similar concerns. “Difficulties in bridging the gulf between the political parties over fiscal policy,” the agency noted at the time, “makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics any time soon.”
According to Fitch and S&P, unlike most developed nations with similar ratings, the U.S. lacks a credible long-term fiscal consolidation plan. Its budgeting process has become an overly complex and politically fragmented quagmire, making it difficult for policymakers to agree on long-term solutions. Lawmakers’ frequent use of debt limit standoffs as negotiating leverage has exacerbated this erosion of confidence in governance, leaving fundamental issues unresolved year after year.
The numbers paint an even starker picture—something the Fitch analysts were quick to point out. Over the past three years, the government deficit has nearly doubled, climbing from 3.7% of GDP in 2022 to 6.4% by the end of 2024. Despite the planned cost-cutting efforts by the newly elected administration, this trend is projected to worsen in the short term. Deficits are expected to widen to 6.9% of GDP in 2025, at nearly twice the inflation-adjusted 50-year average deficit. According to the Congressional Budget Office (CBO), 2025’s deficit will come close to crossing the $2 trillion mark for the first time in history.
Meanwhile, the debt-to-GDP ratio, which measures a country’s debt relative to its economic output, has remained a glaring red flag for all three credit rating agencies. Although it has decreased from its pandemic high of 126% in 2020 to 123% in 2024, the ratio remains well above pre-pandemic levels of 100%. To put this into perspective, the median debt-to-GDP ratios for AAA-rated and AA-rated sovereigns stand at only 39.3% and 44.7%, respectively. Such figures are compounded by the strain of servicing this growing debt, with the cost of interest payments expected to be the second largest expenditure in 2025, surpassing spending on national defense.
Experts from various sectors and political leanings have long warned of the consequences of kicking the can down the road regarding fiscal responsibility. With national debt levels already perilously high, decisions over the next few years will determine whether the nation can reclaim its credibility—or sink further into economic vulnerability.
Can the U.S. Reclaim Its AAA Credit Rating?
America’s once-pristine ‘AAA’ credit rating status, long seen as a symbol of its economic strength, now faces growing skepticism and even outright doubt. Issues like surging debt levels remain glaring and unsettled, and without a clear resolution, it’s unlikely credit agencies will change their stance any time soon. Fitch’s Head of Sovereign Ratings, James Longsdon, has stated that the agency will be closely monitoring Trump’s legislative and fiscal developments during his term. “I think you would have some answers,” Longsdon remarked, alluding to an evaluation of how bold or gradualist the administration’s policies will ultimately prove to be.
Longsdon’s observations echo a broader unease shared by many economists, who fear that mounting fiscal pressures will make it difficult for the U.S. to service its debt in the future. While maintaining its AAA rating, Moody’s revised its outlook from stable to negative in November 2023, citing concerns over “continued political polarization” and “debt affordability.” The agency noted that the U.S. economy’s deep pool of capital has so far insulated it from fiscal pressures but cautioned that this may not hold true indefinitely. Should Moodys follow through with a downgrade, the U.S. could face higher borrowing costs, which could compound budgetary pressures and potentially crimp economic growth.
As President Trump begins his second term, he is tasked with not only steering the American economy out of its current treacherous waters but also with addressing the underlying issues that put it there. The broken pieces of the previous administration’s policies will take time to repair, and in the meantime, Americans are holding their breath, hoping for the best. Despite Republicans winning control over both congressional chambers in the recent election, their narrow margin may still pose challenges to Trump’s agenda—particularly considering his unconventional approach to party politics.
Looking ahead, promised initiatives, such as Trump’s extension to the 2017 tax breaks, could provide a temporary boost to the economy, but experts warn that this could come at the cost of further ballooning the deficit. “This thing cannot be deficit neutral,” said Ralph Norman, a conservative House Freedom Caucus member, in response to Trump’s tax proposal.
The Committee for a Responsible Federal Budget estimates that the proposed tax cuts could add $4 trillion to the national debt over the next decade. Combined with President Trump’s pledge to eliminate taxes on tips and Social Security, the total debt could soar even higher. As more baby boomers retire and start collecting social security, the burden on the program’s funding is expected to increase—a potential disaster for those who have paid into the system their entire working lives.
At over $36 trillion today, economists warn that the U.S. debt pile has grown beyond the scope of simple budget cuts and beyond the capability of any one administration to fix. “The national debt is on course to reach a new record share of the economy within the next presidential term, interest costs are exceeding what we spend on nearly every line item in the budget, and our trust funds are heading towards insolvency and automatic benefit cuts, all because of our inaction,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. “Instead of treating these milestones as mundane, lawmakers should prioritize putting forward plans to get us on a more sustainable fiscal path.”
President Trump’s ambitious agenda doesn’t stop there. Targeted tariffs against China, Canada, and Mexico could lead to retaliatory measures or more expensive goods for the American consumer, warn some experts. “Strong consumer spending, tariff hikes, and a slowdown in net immigration will keep U.S. inflation above target for the next two years,” said Brian Coulton, chief economist at ratings agency Fitch. Echoing these concerns, Mark Zandi, chief economist at Moody’s Analytics, stated, “Trump is using tariffs as a political device to signal his strong skepticism around globalization broadly—’ America First.’ That this policy stance is inflationary is very difficult for most voters to grasp, especially when they are being told the opposite.”
With recurring standoffs over the country’s debt, paired with inconsistent fiscal frameworks, credit agencies’ concerns are unlikely to be assuaged anytime soon. And even with the Department of Government Efficiency’s efforts to curb spending, projected annual savings pale in comparison to the magnitude of the debt. It’s a step in the right direction, but only so much fat can be trimmed before cutting into muscle.
Global Confidence in U.S. Debt is Fading—What it Could Mean for You
When a nation’s credit rating downgrades, the effects ripple far beyond government circles. It’s a sobering reminder for its citizens that fiscal policy can directly affect their pocketbooks. The United States’ credit rating falling from AAA to AA+ is more than a symbolic loss—it reflects growing concerns over fiscal stability. As Jodey Arrington, House Budget Chairman, aptly said, “This is a wake-up call to get our fiscal house in order before it’s too late.”
The longer this downgraded status persists, the greater the strain will be on economic confidence and foreign investment. Global faith in U.S. debt is already wavering, with foreign investors questioning its reliability as a safe avenue for their money. Without swift corrective action, such skepticism can escalate, driving up borrowing costs and squeezing both the government and households alike.
The consequences for ordinary Americans can hit closer to home than they expect. “The only certainty is uncertainty,” warned Ryan Sweet, Chief U.S. Economist at Oxford Economics, and a lower credit rating only deepens that ambiguity. Inflation could surge further, eroding the purchasing power of savings. The potential weakening of the U.S. dollar, combined with unstable financial markets, adds another layer of complexity to safeguarding one’s financial future. Though the U.S. remains resilient due to its historical economic strength, perceptions of long-term stability are dwindling.
For investors, a downgraded credit rating fundamentally alters the risk-reward calculation. A higher perceived risk requires higher returns to justify investment, meaning interest rates on loans and mortgages could rise across the board. Investors, too, are growing uneasy about the federal government’s mounting debt, which is on a trajectory to surpass sustainable limits. This precarious fiscal state worsens the outlook for U.S. economic resilience and increases the possibility of long-term instability.
Yet, in this uncertainty, one timeless asset has emerged as a reliable hedge—precious metals like gold. Historically, gold’s role as a haven asset shines brighter when nations face credit crises or currency devaluation. Its value often rises as confidence in paper currencies declines. Today, central banks and private investors alike are ramping up their gold holdings, recognizing its significance as a store of value in turbulent times. As inflation and fiscal uncertainties may be looming, diversifying portfolios with precious metals can help buffer against potential losses.
With political will and cooperation seemingly in short supply, reaching a sustainable solution to the U.S. debt crisis will not be easy. Compounded by the ever-increasing cost of programs, President Trump’s second term is set to face a Herculean task—something that credit ratings agencies have not failed to notice. While challenges lie ahead, the time-tested role of gold in preserving wealth remains a bright spot in an otherwise murky economic landscape.
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