Rating action

Scope Ratings GmbH (Scope) has today affirmed the United States of America’s local and foreign currency long-term issuer and senior unsecured debt ratings at AA with Negative Outlook. The short-term issuer ratings have been affirmed at S-1+ in local and foreign currency and the Outlooks revised to Stable from Negative.

The affirmation of the AA rating is underpinned by the size, wealth, and competitiveness of the US economy, the dollar as the world’s primary reserve currency ensuring US treasuries remain the global safe asset and benefit from the deepest, most liquid capital markets, and the Federal Reserve as a leading global central bank.

The Negative Outlook is driven by:

1. The sustained deterioration of public finances reflected in persistently elevated federal deficits and a rising net interest payment burden, driving the continuous rise of the public debt-to-GDP ratio, which Scope expects to exceed 130% over the coming years – well above most sovereign peers. The planned extension of past tax cuts and the high share of mandatory spending curtail budgetary flexibility in the near term. Long-term public debt challenges are compounded by large and unfunded contingent liabilities, particularly from Medicare and Medicaid, which, absent meaningful reform, remain far larger than those of sovereign peers.
    
2. Deepening institutional and policy uncertainty arising from significant and unpredictable policy shifts including possible partial reversals under the second Trump administration. These developments raise concerns regarding the stability and predictability of US policymaking. This includes risks to the institutional integrity of long-standing checks and balances within the US governance system such as challenges to the commitment of the Federal Reserve to anchor inflation expectations.

For the updated rating report, please click here.

Key rating drivers

Persistently high fiscal deficits, rising interest expenses and constrained budgetary flexibility drive a steady rise in general government debt-to-GDP.

The general government deficit widened to 7.3% of GDP last year, well above the pre-pandemic average of around 4.8% between 2015-19. Scope expects the deficit to remain elevated in 2025 at around 6.4% of GDP, averaging around 7% over 2026-2030, driven by rising interest rates and greater funding needs to support entitlement programmes like Social Security, Medicare, and retirement and disability services for military and civil servants. Further pressure on government finances is expected due to the likely extension of the 2017 Tax Cuts and Jobs Act, additional proposed tax reductions, as well as higher defence and border security spending.

Without corrective fiscal measures, Scope expects the general government debt ratio for the United States to reach 133% of GDP by 2030, above forecasted debt levels in France (AA-/Stable) at 122% and the UK (AA/Stable) at 111%, and only slightly below Italy (BBB+/Stable) at 137%. The projected increase is driven by persistent primary budget deficits and high net interest payments averaging around 12% of revenues between 2025 to 2030. Since the average maturity of treasuries is low at 5.9 years, compared with an advanced-economy average of 7.2 years¹, higher interest rates impact debt dynamics relatively quickly. Annual government gross financing requirements are very high at 38% of GDP this year and are expected to remain elevated, averaging 34% of GDP over 2026-30 – the highest of any Scope-rated sovereign borrower except that of Japan (A/Stable).

Constrained budgetary flexibility limits the administration’s ability to offset the higher spending needs with significant spending cuts or revenue increases. In 2024, mandatory spending, including the major healthcare programmes and Social Security, accounted for around 60% of annual federal spending. Discretionary spending, determined by the President and Congress in the annual budget and appropriations process, accounted for around 27% of which almost half relates to defence spending. Finally, net outlays for interest represented around 13% of annual spending. Over the next decades, the Congressional Budget Office projects continued spending pressures particularly from rising mandatory spending and outlays for interest with the debt-to-GDP ratio rising to 169% by 2055². This also reflects long-run ageing-related spending pressures. The IMF³ estimates a net present value of health care (112%) and pension (15%) spending of 127.5% of GDP over 2024-50, the highest projected increase among advanced economies.

President Trump’s proposed reductions in discretionary funding for the fiscal year 2026, combined with higher expected revenues from tariffs, are unlikely to significantly lower the budget deficit. Proposals include significant cuts to non-defence discretionary spending of 22.6%, or USD 163bn⁴. Still, with total government spending of USD 6.75tr in 2024, such spending cuts would represent only 0.5% of GDP. In addition, proposals to raise defence spending by 13% suggest that total discretionary spending will remain broadly unchanged. Additionally, new tariffs announced in April 2025 on “Liberation Day” could, according to estimates by the University of Pennsylvania’s Wharton School, generate around USD 145bn per year over the next decade (less than 0.5% of GDP).

Finally, even if additional savings can be identified by reducing fraud and improper payments⁵, significantly reducing the deficit through spending cuts would also require reductions in mandatory outlays. With no expected cuts to social security, Medicare and defence-related spending, stabilising the public debt trajectory over the coming years will prove challenging without further revenue-raising measures such as tax increases.

Rising policy uncertainty and abrupt shifts undermine the stability and predictability of US policymaking.

Since taking office in January 2025, the second Trump administration has implemented a series of abrupt and unorthodox trade policy shifts to advance its protectionist economic agenda. Despite a temporary pause on the most substantial “Liberation Day” tariffs, the effective tariffs represent the most significant peacetime trade shock to the global economy since 1943. The US’ effective tariff rate has increased sharply to 11.1% following the 90-day pause⁶, which ends in July, and could cause imports to fall by more than 20%. This compares to an effective tariff rate of 2.5% prior to the trade policy announcements.

The elevated policy uncertainty over the final tariff rate and the ultimate shape of trade deals between the US and its major trading partners, including Canada, Mexico, China and the EU (which absent a trade deal by 9 July is set to impose retaliatory tariffs) has led to increased market volatility. This environment has adversely affected real US households’ income and business confidence, and thus economic growth. Scope has lowered its economic growth estimate to 1.3% for 2025 and 1.8% in 2026.

Still, the erratic nature of the Trump administration’s policymaking combined with a strong incentive among trading partners to avoid a full-scale trade war suggests that the final trade arrangements remain uncertain. Business investment decisions are being delayed, lowering the US’ economic growth outlook. However, it is premature to assess whether and how supply chains will shift and the extent to which the Trump administration’s policy shift will ultimately impact the US’ medium-term growth outlook, which Scope currently estimates at around 2%, above that of most advanced economies. Moreover, the recent AI-driven capital expenditure boom could, among other factors, sustain upward pressure on growth, potentially even towards 3% despite the uncertainties created by the Trump administration. A prolonged period of uncertainty as regards the final trade arrangements with major trading partners and/or signs that corporate investment decisions are further delayed or cancelled, reducing the US’ economic growth outlook would be credit negative.

The Trump administration’s protectionist policy agenda, which is likely to increase inflation at least temporarily, conflicts with its stated objective of lower interest rates for the US economy. While President Trump has repeatedly increased political pressure on the Federal Reserve to lower its policy rates, it appears that market forces and institutional checks and balances have so far preserved the Fed’s operational independence. Any perceived erosion of the Federal Reserve’s commitment to anchoring inflation expectations would also be credit negative.

Finally, Scope expects the debt ceiling to be raised or suspended before the so-called X-date, which is projected to fall between August and September 2025⁷. The debt ceiling suspension expired in January 2025 and has been reinstated at USD 36.1tr. The government breached this limit in mid-January 2025 and has begun resorting to "extraordinary measures". Once the extraordinary measures are exhausted and cash reserves are depleted, the debt ceiling will have to be raised or suspended to avoid a government shutdown. Should policymakers fail to raise, suspend or reform the debt ceiling on time resulting in a sustained period of government shutdown and/or financial market uncertainty, this would be credit negative.

Credit rating strengths: the largest economy globally, the dollar as the world’s primary reserve currency and US treasuries as the global safe asset, and the Federal Reserve as globally leading central bank.

The United States’ AA credit rating reflects several exceptional credit strengths, including a wealthy, competitive, and highly diversified economy – the largest in the world by nominal GDP and the second largest by purchasing power parity. The US also benefits from the unique global role of US Treasuries as the primary safe-haven asset and the US dollar as the world’s reserve currency. These factors provide unmatched flexibility in government financing and help mitigate long-term debt sustainability concerns, despite relatively high public debt levels compared to sovereign peers.

The US is also supported by strong, transparent, and accountable economic institutions, including the Federal Reserve – widely regarded as the world’s leading central bank – which underpins macroeconomic and price stability. The country also hosts some of the deepest and most liquid capital markets globally. However, financial system vulnerabilities could increase over the medium to long term due to potential financial deregulation, especially in a scenario of persistently higher borrowing costs.

Outlook and rating sensitivities

The Negative Outlook reflects Scope’s view that risks to the ratings are skewed to the downside over the coming 12 to 18 months.

Downside scenarios for the ratings and Outlooks are (individually or collectively):

1. Prolonged policy uncertainty, such as unresolved trade negotiations with major trading partners, hampering the medium-term growth outlook;
    
2. Deterioration in public finances, for example, through a sustained increase in the debt-to-GDP ratio;
    
3. Conflicting or unorthodox policies challenging the long-standing checks and balances of the US governance system, for example, rising doubts about the Federal Reserve’s commitment to anchor inflation expectations;
    
4. A prolonged debt ceiling crisis; and/or
    
5. Evidence of a significantly reduced role for the US dollar as the global reserve currency, leading to lower global demand for US treasuries.

Upside scenarios for the ratings and Outlooks are (individually or collectively):

1. A reduction of policy uncertainties, for example, due to a resolution of trade negotiations resulting in a more favourable economic outlook;
    
2. Reduction of the risk from unorthodox policies, assuring the preservation of the US’ long-standing checks and balances;
    
3. Improved public finances, for example, through a stabilisation or steady decline of the debt-to-GDP ratio; and/or
    
4. Changes to the fiscal framework that durably ease debt ceiling risks.

Sovereign Quantitative Model (SQM) and Qualitative Scorecard (QS)

Scope’s SQM, which assesses core sovereign credit fundamentals, signals a first indicative credit rating of ‘a-’ on the United States. Under the methodology, this indicative rating receives a further: i) three-notch positive adjustment from the model reserve-currency adjustment; and ii) no negative adjustment from the methodological political-risk quantitative adjustment. On this basis, a final SQM quantitative rating of ‘aa-’ is determined. This indicative rating is thereafter reviewed by the analyst-driven Qualitative Scorecard (QS) and the rating can be adjusted by up to three notches up or down from the model rating depending on the size of the qualitative credit strengths or weaknesses of the sovereign compared against an SQM-assigned sovereign peer group.

For the United States, the QS signals relative credit strengths against indicative sovereign peers for the following qualitative analytical category: i) growth potential and outlook; ii) monetary policy framework; iii) macro-economic stability and sustainability; iv) debt profile and market access; v) external debt structure; vi) resilience to short-term external shocks; and vii) banking sector performance. Conversely, relative QS credit weaknesses are signalled for: i) fiscal policy framework; ii) long-term debt trajectory; iii) environmental factors; and iv) governance factors.

On the aggregate, the QS generates a one-notch positive adjustment against the model rating of the United States and indicates AA long-term foreign- and local-currency issuer ratings.

A rating committee has discussed and confirmed these results.

Environment, social and governance (ESG) factors

Scope explicitly factors in ESG sustainability issues during the ratings process through the sovereign rating methodology’s stand-alone ESG sovereign risk pillar, having a significant 25% weighting under the quantitative model (SQM) and 20% weighting under the analyst-driven Qualitative Scorecard.

In respect to environmental factors, the US receives a high SQM score relating to climate-related natural disaster risks as captured by the ND-GAIN Index, signalling greater resilience to a range of potential environmental hazard compared with peers. However, the country receives lower scores for carbon emissions per unit of GDP, greenhouse gas emissions per capita, and an average score on the ecological footprint of consumption compared with available biocapacity. According to the National Centers for Environmental Information, the US experienced 400 significant climate disasters since 1980 presenting an aggregate price tag of around USD 2.95tr⁸. Under the second Donald Trump administration, the US withdrew from the Paris Climate Accords for a second time, repealed or weakened environmental rules, and reiterated its commitment to fossil fuel development and deregulation. Under the analyst-driven QS, the United States has been assigned a ‘weak’ assessment on the ‘environmental factors’ analytical category against the sovereign’s peer group.

Credit factors relating to the performance of the sovereign on social benchmarks are also captured by the SQM quantitative model and QS analyst overlay. Under the SQM, the US receives a low score on income inequality, as measured by the income share held by the bottom 20%. On labour-force participation, the US scores below average as labour-force participation (of those aged 16+) remains slightly below pre-pandemic levels at 62.6% as of April 2025. The US receives a weak score on the SQM for its old-age dependency ratio, although still outperforming most of its peers. Under the QS, Scope considers polarised distributions of household incomes and wealth, the decline of socio-economic mobility, long-standing racial tensions and elevated poverty. President Trump has introduced policies that would significantly impact social issues, with a focus on deregulation and merit-based systems. While these actions aim to reduce federal intervention, they have raised concerns about their potential to exacerbate social inequalities and have prompted legal and political challenges. Scope assigns a ‘neutral’ qualitative assessment to the U.S. in the ‘social factors’ category relative to its sovereign peer group.

Under governance-related factors captured by the SQM, the United States maintains good average scoring on six World Bank world governance indicators (WGIs), although the US’ scores are weaker than that of sovereign peers – especially on ‘political stability and absence of violence & terrorism’. The United States’ scores have weakened on five of the six WGIs during the last decade. Nevertheless, the United States benefits from resilient democratic institutions and checks and balances protecting accountability and transparency. President Trump has set a new record for executive actions in his second term, signing over 140 executive orders within his first 100 days, surpassing the combined total of his first term and that of his immediate predecessor, Joe Biden. Beyond the SQM, Scope assesses the ‘governance factors’ analytical category of the QS for the United States as ‘weak’ against the peer group of sovereign states.

Rating committee
The main points discussed by the rating committee were: i) domestic economic risk; ii) public finance risk; iii) external economic risk; iv) financial stability risk; v) ESG-related risk; and vi) rating peers.

Rating driver references
1. IMF World Economic Outlook, April 2025
2. Congressional Budget Office, The Long-Term Budget Outlook: 2025 to 2055
3. IMF Fiscal Monitor, April 2025
4. The White House, FY 2026 Discretionary Budget Request
5. US Government Accountability Office, Fraud and Improper Payments
6. Tax Foundation, Trump Tariffs: The Economic Impact of the Trump Trade War, 5 May 2025
7. Congressional Budget Office, Federal Debt and the Statutory Limit, March 2025
8. National Centers for Environmental Information

Methodology
The methodology used for these Credit Ratings and Outlooks, (Sovereign Rating Methodology, 27 January 2025), is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The model used for these Credit Ratings and Outlooks is (Sovereign Quantitative Model Version 4.0), available in Scope Ratings’ list of models, published under https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information 
The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With Rated Entity or Related Third Party participation      YES
With access to internal documents                                     NO
With access to management                                             YES
The following substantially material sources of information were used to prepare the Credit Ratings: public domain and the Rated Entity.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and Outlooks and the principal grounds on which the Credit Ratings and Outlooks are based. Following that review, the Credit Ratings and Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and Outlooks are UK-endorsed.
Lead analyst: Eiko Sievert, Executive Director
Person responsible for approval of the Credit Ratings: Giacomo Barisone, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings in January 2003. The Credit Ratings/Outlooks were last updated on 29 June 2023.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin. Public Ratings are generally accessible to the public. Subscription Ratings and Private Ratings are confidential and may not be shared with any unauthorised third party.