US loses top credit rating due to deficit and debt increase under Trump, leading to higher borrowing costs

From Yahoo Finance: 2025-05-16 18:39:00

The United States loses its top credit rating for the first time as Moody’s downgrades it to Aa1 due to soaring deficit and debt interest costs. This downgrade could lead to higher borrowing costs for the US government and increased risks for bond investors.

Moody’s warns that Trump’s tax cuts and spending plans could add $4 trillion to the federal deficit over the next decade. The deficit is projected to rise to nearly 9% of GDP by 2035, with federal government debt reaching 134% of GDP.

Trump’s aggressive tariffs caused a bond market revolt, leading to soaring yields on US treasuries and increased government debt costs. The US debt has been steadily increasing due to large deficits and decreased tax revenue, now nearing $37 trillion.

Conservatives blocked Trump’s tax and spending bill over concerns about costs. The president’s tax cut extensions are projected to worsen the deficit and debt, putting further strain on the US budget and financial outlook.

Read more: US stripped of top credit rating as Trump plots tax cuts