S&P Global Maintains US Government Debt Rating Despite Tariffs and Spending Bill

Strategic Insights -

S&P Global has announced that it will maintain its sovereign credit rating on US government debt at 'AA+/A-1+', citing the revenues generated from President Donald Trump's aggressive tariff policies as a key factor. The agency's analysts predict that "broad revenue buoyancy, including robust tariff income, will offset any fiscal slippage from tax cuts and spending increases" planned in the US. This verdict comes after the Trump administration imposed tariffs on dozens of trading partners worldwide, sparking fears of a global economic slowdown. Despite concerns over the rising levels of government debt and a widening budget deficit, S&P analysts believe that the US economy remains resilient and will not experience a persistent deterioration in the next several years.

Key Takeaways:

  • S&P Global maintains its sovereign credit rating on US government debt at 'AA+/A-1+', citing robust tariff income and a resilient US economy.
  • Analysts forecast that tariff revenues will offset fiscal slippage from tax cuts and spending increases planned in the US.
  • The US economy is expected to remain resilient, with the budget deficit averaging 6% of GDP for 2025-28.
  • Net general government debt is likely to near 100% of GDP due to federal agencies spending on ageing populations.
  • The yield on the 30-year US sovereign bond has risen to 4.9%, close to its highest levels in two years.
  • US tariff revenues surged nearly $50bn in the second quarter, with duties on some countries rising as the president's team pushes to secure new trade deals.

Statistics:

  • US government debt ceiling increased by $5 trillion, the largest one-time statutory increase in history, taking the borrowing limit to $41 trillion.
  • US tariff revenues surged nearly $50 billion in the second quarter.
  • The budget deficit at 6.2% of GDP, according to the Federal Reserve Bank of St Louis.
  • US deficit spending has soared in recent years, with the budget deficit averaging 6% of GDP for 2025-28.
  • The yield on the 30-year US sovereign bond has risen to 4.9%, close to its highest levels in two years.

Sources:

  • S&P Global, "US government debt rating maintained by S&P", August 2023.
  • Federal Reserve Bank of St Louis, "Economic Data", August 2023.
  • S&P Global, "U.S. sovereign credit rating maintained", May 2023.