On Friday, Moody’s, one of the three main credit rating agencies, downgraded the US sovereign credit rating by one notch to ‘AA1’ from ‘AAA,’ citing the growing American debt pile. This action makes Moody’s the last of the big three rating firms to downgrade the federal US debt, following similar actions by Fitch in 2023 and S&P in 2011.

Moody’s cited concerns regarding the rising federal debt in the world’s largest economy and the Trump administration’s failure to contain it. The US debt pile is estimated at $36 trillion. Despite the downgrade, the agency revised its outlook for the US to 'stable' from 'negative'. The rating downgrade could face criticism from Team Trump, as it may hinder or delay the administration’s plans to cut taxes, potentially sending shockwaves across Wall Street and global markets.

Moody’s had assigned the pristine ‘AAA’ rating to the US more than 100 years ago, in 1919. However, the credit rating issuer stated that the US continues to have “exceptional credit strengths such as the size, resilience and dynamism of its economy” and the role of the dollar as a global reserve currency.

Moody’s anticipates that the US federal deficits will widen to 9.0 percent of the economy by 2035 from 6.4 percent in 2024. This significant widening of deficits is expected to be caused primarily by interest payments on debt, rising entitlement spending, and relatively low revenue generation.

The downgrade implies reduced confidence in America’s creditworthiness amid a rising debt-to-GDP ratio. According to Moody’s, follow-up moves to the Trump 1.0 administration’s tax cuts may add $4 trillion to the primary US federal deficit over the next decade. Tax cuts have been a main priority of the Republican-controlled Congress in the US.

In other financial news, Michael Burry, known for predicting the 2008 housing crash, is making a significant bet against Nvidia stock. President Trump indicated that the U.S. will unilaterally set tariff rates for many trading partners soon, citing a lack of capacity for negotiations. Additionally, the Trump Organization has been approved for a $1.5 billion golf resort in Vietnam.

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