The United States’ loss of its last triple-A credit rating and mounting concerns about government debt are threatening to disrupt the relative calm in financial markets that has prevailed since President Trump began pausing tariffs early last month.
One factor jarring markets is a bill in Congress that would make Mr. Trump’s signature 2017 tax cuts permanent and could add trillions of dollars to federal debt. A House committee voted to approve the bill on Sunday night although it was expected to remain a focus of contentious congressional debate.
On Friday, the ratings firm Moody’s cited the legislation, along with broader concerns about the fiscal deficit and growing debt costs, when it downgraded the credit rating of the United States. The move by Moody’s means that all three major rating agencies no longer consider the United States qualified for their top credit ratings.
U.S. stock futures indicated that markets would decline about 1 percent when they begin trading in the United States on Monday morning.
During Asia trading, South Korea’s Kospi and Taiwan’s Taiex indexes fell more than 1 percent. Stocks in Tokyo and Hong Kong declined about 0.5 percent. The U.S. dollar continued to weaken against other currencies including the euro and yen.
The U.S. credit rating downgrade could send further ripple effects through financial markets if it begins to shake the safe-haven status of Treasury bonds. That would likely spur global investors to demand higher premiums in return for buying U.S. debt.
The 10-year Treasury bond yield climbed to 4.51 percent in Asian trading, after closing at 4.44 percent on Friday.
Some analysts attributed the rise in yields to the credit downgrade exacerbating existing concerns about Mr. Trump’s tariff agenda and the effect it may be having on the American economy and its assets.
U.S. stocks had made strong gains last week when investors reacted positively to the U.S.-China deal to cut tariffs.
Analysts say that the downgrade of the U.S. credit rating could train a spotlight on fiscal spending and interest rates paid on government debt in other countries as well. That includes in Japan, which has one of the highest debt-to-GDP ratios in the world.
When Standard & Poor downgraded U.S. Treasury bonds in 2011, the move contributed to significant volatility in global financial markets. All three major stock indexes declined in the United States, dragging on markets in Asia and Europe as well.
River Akira Davis covers Japan for The Times, including its economy and businesses, and is based in Tokyo.
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