S&P affirms US credit rating at AA+ despite soaring debt

S&P Global has upheld its rating on US government debt, stating that revenues from President Donald Trump’s aggressive tariff policies are expected to offset the effects of the administration’s major tax and spending bill. 

The agency confirmed late Monday that the US sovereign credit rating remains at ‘AA+/A-1+’, its second-highest tier, supported by a resilient economy and “credible, effective” monetary policy.

S&P analysts believe that the US’s budget deficits will decline in the years to come 

Analysts said that Broad revenue buoyancy, including robust tariff income, will offset any fiscal slippage from tax cuts and spending increases planned in the coming years. The announcement follows the Trump administration’s tariffs on dozens of trading partners, with import duties reaching their highest levels in nearly a century—raising concerns about potential impacts on global growth. 

Meanwhile, Congress approved Trump’s $5 trillion tax and spending package, which is expected to push federal debt past its post-World War II peak and raise the borrowing limit to $41 trillion.

On the other hand, Moody’s, S&P’s major competitor, downgraded the US’s credit rating earlier this year over concerns about rising debt and widening budget deficits. Even after this, S&P analysts still believe that while the deficit between government spending and revenue “will not meaningfully improve,” they do not expect a persistent deterioration over the next several years.

The US tariff revenues surged nearly $50 billion in Q2, the first full quarter after the new tariffs were implemented. At the same time, deficit spending remains high, with the budget shortfall at 6.2% of GDP, according to the Federal Reserve Bank of St. Louis. The 30-year US Treasury bond yield has climbed to 4.9%, near its two-year high, amid expectations of increased debt issuance.

S&P projects net government debt could approach 100% of GDP due to spending pressures, including costs related to an ageing population. Nevertheless, the agency expects contentious issues such as the debt ceiling to be resolved promptly, given the severe economic and financial market consequences of delays. The US budget deficit is forecast to average 6% of GDP from 2025–2028, down from 7.5% last year.

Brazil officials reject S&P’s view on the US trade investigation

Brazilian officials have strongly disapproved of the US trade investigation in a related development. The officials reject the agency’s claims as they doubt the investigation’s legitimacy. 

To address the above allegations, Jamieson Greer, an American attorney who serves as the US trade representative, highlighted that the trade investigation will first closely investigate whether Brazil’s rules applicable to digital trade and tariff policies affect US businesses in any way.

In the meantime, it is worth noting that this trade investigation was first initiated in July under Section 301 of the 1974 Trade Act. Fernando Haddad, the Minister of Finance of Brazil, also weighed in on the topic of discussion. According to Haddad, Brazil is currently at a standstill with the US regarding tariffs. Based on the Minister’s argument, a suitable solution can be struck; however, this will depend on Washington’s readiness to negotiate with them.

This condition was made in response to Trump’s earlier assertion that he would impose “reciprocal” tariffs on several US trading partners. Even with concerns about Trump’s broad tariffs, S&P’s perspective remains unchanged.

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