Triple-A No More—Moody’s Strips U.S. of Top Rating Amid Exploding Debt and Market Mayhem
On Friday, credit rating agency Moody’s downgraded the United States’ long-term credit rating from Aaa to Aa1, pointing to a decade of mounting debt and escalating interest payment pressures. The development lands amid intensifying recession concerns, turbulent trading conditions, and disjointed activity across bond markets.
Moody’s, a Nationally Recognized Statistical Rating Organization (NRSRO) authorized under U.S. securities law to evaluate government credit, explained this week that the U.S. continues to operate with sizable deficits while avoiding substantive fiscal tightening—either through spending restraint or increased taxation—resulting in an ever-growing debt load and diminishing capacity to manage interest obligations.
The agency said the credit downgrade reflects intensifying budgetary strains. Federal debt is projected to climb markedly, rising from 98% of GDP in 2024 to 134% by 2035. Simultaneously, Moody’s projects that the federal deficit will swell to nearly 9% of GDP over that span. Further exacerbating the situation, interest on the debt could consume 30% of federal revenue by 2035—up sharply from 18% in 2024 and just 9% in 2021.
Complicating matters, the U.S. now contends with recession jitters, erratic market behavior, and disorder in fixed-income markets—largely stemming from a mix of aggressive tariff regimes and elevated borrowing costs. In early April 2025, President Trump introduced sweeping duties on all trading partners, setting a baseline levy with steeper penalties for nations with significant trade surpluses against the U.S.
These sweeping trade actions, now encompassing trillions in imports, have roiled financial markets, shaken confidence in the S&P 500, sparked distress signals in bond pricing, and contributed to a softer U.S. dollar. Moody’s acknowledged the enduring pillars of the U.S. economy—its vast scale, technological dynamism, and the unrivaled status of the U.S. dollar as the world’s primary reserve currency. Yet, these foundational attributes no longer fully counterbalance the nation’s worsening fiscal trajectory.
Despite retaining a high credit rating, the downgrade may incrementally elevate borrowing costs and dampen investor enthusiasm for U.S. sovereign debt. Moody’s cautions that America’s fiscal standing is deteriorating not only in absolute terms but also in comparison to its affluent peers. At its core, Moody’s sees a government deeply tethered to debt financing, showing little inclination to change direction—casting a deepening shadow over the long-term viability of U.S. public finances.