The Trump administration’s economic plan has dashed America’s credit score, rocking the nation’s lending reputation. And experts warn this could be the beginning of the end.
Credit firm Moody’s downgraded the nation’s score Friday, reporting that it appears increasingly unlikely that the U.S. economy will be able to keep up with its rising debt and interest payments, rattling what was once an unshakable confidence in U.S. growth.
Major international lending entities, such as Deutsche Bank, viewed the score drop as just another indicator that time is running out on solving America’s national debt.
“Yesterday felt like we were somewhere along the line of a ‘death by a thousand cuts’ with regards to the U.S. fiscal situation,” Deutsche Bank’s Jim Reid wrote, in a note obtained by Fortune Tuesday. “Hard to know where in that thousand we are but probably much nearer a thousand than at zero even as yesterday saw an initial sell-off reverse as the session went on.
“At the end of the day the loss of the final U.S. triple-A rating late on Friday night doesn’t change anything much immediately but it keeps the drip, drip, drip of poor fiscal news building up against the debt sustainability dam in the background.”
Ratings from Moody’s and other firms inform companies and groups both foreign and domestic regarding how much they need to pay in order to borrow money.
Moody’s was the last of the three major bond-rating agencies to downgrade America’s formerly spotless score, signaling that the nation is a bigger credit risk than it has been in decades. It also indicates that the time in which the U.S. could borrow seemingly infinite sums of money—without the risk of inflation—is coming to a close.
America’s national debt is currently more than $36.8 trillion, as of the time of publishing.
The Trump administration, however, has not yet looked inward for an explanation to the sour score. Instead, it has pushed blame onto the Biden administration, claiming that Republicans are still working overtime to trim the national deficit while they push forward a reconciliation package that would add somewhere between $3.8 trillion and $5.3 trillion to the national debt to afford tax cuts for multimillionaires and corporations.
“I do want to assure everyone that the deficit is a very significant concern for this administration,” top White House economist Stephen Miran told reporters Monday. “We’re determined to bring it down and to undo the damage to the fiscal health of the United States that was wrought by the Biden administration and its reckless policies.”
Treasury Secretary Scott Bessent, meanwhile, brushed off the score downgrade as a “lagging indicator” of U.S. performance, urging investors to disregard the news.
Trump enacted his sweeping tariff plan in order to offset the jaw-droppingly expensive extension to his 2017 tax cuts, but America has yet to see any gains from the economic agenda. Instead, the tariffs have destabilized American markets while simultaneously undermining U.S. dominance in the global economy.
Whether or not the deficit actually affects the economy is still in debate. But having investors believe in the health of the economy is critical.
“The government deficit isn’t a problem until investors think it is,” Callie Cox, chief market strategist at Ritholtz Wealth Management, told Axios Monday. “And they’re increasingly telling us that the deficit is a problem.”
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