Rating action

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

The downgrade of the United States of America’s ratings is driven by:

1. The sustained deterioration of public finances reflected in persistently elevated federal deficits and a rising net interest payment burden. These dynamics are driving the continued increase of the public debt-to-GDP ratio, which Scope expects to reach 140% by 2030 – well above most sovereign peers. The extension of previous tax cuts and the high share of mandatory spending constrain budgetary flexibility in the near term. Over the longer 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. The weakening of governance standards, particularly the erosion of well-established checks and balances, which reduces the predictability and stability of US policymaking. This reflects the increasing consolidation of power within the executive branch – traditionally counterbalanced by the legislative and judicial branches – alongside the diminished effectiveness of Congress amid persistent political polarisation and sustained periods of legislative gridlock. This increases the risk of policy missteps, including by the Federal Reserve, and reduces the capacity of Congress to implement reforms to address the country’s structural fiscal challenges and respond effectively to future economic shocks.

The Stable Outlooks reflect Scope’s view that the US’s AA- credit ratings are supported 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 world’s deepest, most liquid capital markets, and the Federal Reserve as a leading global central bank.

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 8.0% of GDP last year, well above the pre-pandemic average of around 4.8% between 2015-19. Since Scope’s last rating action in May 2025, the One Big Beautiful Bill Act (OBBBA) has contributed to a weakening of the fiscal outlook. Scope expects the deficit to remain high at 7.4% of GDP in 2025, and average around 7.8% over 2026-30, up from 7% at the time of Scope’s last rating action in May 2025. The higher deficit reflects increased spending pressures due to rising interest payments, as well as the extension of the Tax Cuts and Jobs Act, new individual and business tax cuts, and increased defence, immigration and border-related spending. These were partially offset by deficit-reducing elements such as cuts to healthcare provisions, welfare reforms, education reforms and other revenue-raising measures. The deficit expectations include additional revenues from higher tariffs since January 2025, which Scope estimates at around USD 185bn this year (0.6% of GDP), and about USD 311bn (0.9% of GDP) on average each year over the next five years.

Without additional corrective fiscal measures, Scope expects the general government debt ratio for the United States to reach 140% of GDP by 2030, up from 122% in 2024. Among advanced economies, this would place the United States as the second most highly indebted sovereign after Japan (A/Stable), and above forecasted debt levels by 2030 in the UK (AA/Stable) at 115%, France (AA-/Negative) at 125% and Italy (BBB+/Stable) at 137%.

The projected increase is driven by sustained primary budget deficits and rising net interest payments. Given the relatively short average bond maturity of 5.8 years – compared with the advanced-economy average of 8.5 years¹ – higher interest rates are transmitted to debt dynamics relatively quickly. The share of government revenues allocated to net interest payments increased to 11.4% in 2024, from a pre-pandemic average of around 6.8%, and is expected to gradually rise to 13.2% by 2030. The United States remains reliant on foreign demand for US Treasuries, which accounts for around 30% of the publicly held debt. Annual gross government financing requirements are very high, amounting to 43% of GDP in 2024, and set to remain at that elevated level in coming years. In comparison, gross financing needs for the euro area are expected to average around 10% of GDP between 2025 and 2030, 11% in the UK, 22% in Italy, and about 25% in France.

Constrained budgetary flexibility, further exacerbated by the enactment of the OBBBA, limits the administration’s ability to introduce sufficient spending cuts or revenue increases to stabilise the public debt ratio over the coming years. Achieving this would require a mix of significantly stronger economic growth, with simultaneous government spending cuts and higher inflation, while maintaining market confidence and strong demand for US Treasuries to avoid higher interest costs.

Scope’s baseline over the next five years includes economic growth averaging around 2.1% per year, the primary fiscal deficit averaging around 3.9%, and inflation remaining above target at 2.8% in 2025 and 2.7% in 2026 as broad-based tariffs contribute to upward price pressure. As economic growth remained resilient during the first half of 2025, underpinned by strong AI–related investment, Scope projects real GDP growth of 2.1% in 2025 and 2.3% in 2026, followed by a gradual convergence toward a medium‑term potential growth rate of approximately 2%.

The administration has previously stated its goal of achieving 3% economic growth², supported by deregulation and tax cuts, which, however, in itself would be insufficient to stabilise the debt trajectory. A scenario that could stabilise general government debt at around 125% of GDP would additionally require a 1% of GDP reduction in the primary fiscal deficit and inflation being 1pp above baseline at around 3.5% per annum. Highlighting the magnitude of the fiscal challenge the US faces, the primary deficit reduction would need to equate to spending cuts or tax increases averaging USD 360bn per year, or around 5% of total federal government spending in FY 2024³.

Over the next decades, the Congressional Budget Office projects continued spending pressures particularly from rising mandatory spending and outlays for interest⁴. Net interest payments as a share of GDP increased to 3.4% of GDP in 2024 and are projected to reach 5.4% by 2055. As a result, an increasing share of government spending will be allocated to service the growing debt burden, with this share rising from around 14% in FY 2025 to more than 20% by 2055, up from 9% in 2019. Long-run ageing-related costs also contribute to high spending pressures. The IMF⁵ estimates a net present value of health care (101%) and pension (13%) spending of 114.3% of GDP over 2024-50, the highest projected increase among advanced economies, further underpinning Scope’s decision to downgrade the credit rating to AA-.

The weakening of governance standards lowers the predictability of US policymaking, increases the risk of policy missteps, and reduces the capacity of Congress to address the country’s structural fiscal challenges.

President Trump’s second term has displayed a marked consolidation of power within the executive branch, frequently exercised via unilateral decrees often at the expense of the legislative and judicial branches. This shift has weakened the traditional system of checks and balances that has long supported effective governance in the United States. The administration has on several occasions defied court orders, challenged judicial authority, circumvented Congressional oversight, and marginalised independent agencies, weakening institutional safeguards designed to limit executive power. In Scope’s view, these developments are reducing the predictability of US policymaking, resulting in greater policy volatility and an environment of heightened policy uncertainty, as evidenced, for example, during the tariff negotiations with key trading partners.

Moreover, the weakening of governance standards has also deepened long-standing political polarisation contributing to an increasingly ineffective Congress. This is reflected in frequent legislative gridlocks and the recent government shutdown underscoring the widening ideological divide. In this environment, bipartisan compromise to address the country’s structural fiscal challenges appears increasingly unlikely. Meaningful reform, whether through taxes and/or adjustments to entitlement programmes like Social Security, Medicare, and military and civil service pensions, will require broad political consensus which remains elusive. These programmes are expected to remain the main drivers of US fiscal expenditure in coming years.

Congressional polarisation also matters in the context of the recurring debt ceiling crises. Under the OBBBA, the debt ceiling was raised by USD 5tn to USD 41.1tn, a general government debt level, which is set to be exceeded by 2027. This makes the results of the November 2026 midterms a key determinant of whether a renewed political stand-off and the associated risk of a near or technical default emerges. The debt ceiling represents an unresolved flaw in the US fiscal framework and a long-standing credit weakness given the country’s high and rising public debt and heightened political polarisation.

Finally, the weakening of governance standards also increases the risk of policy missteps, including by the Federal Reserve. With the central bank’s dual mandate, ongoing political pressure from the administration to lower interest rates despite resilient growth, low unemployment (4.3% as of August 2025), sticky inflation and loose financial conditions, raises the risk of the Federal Reserve continuing to miss its 2% target over coming years. US annual inflation stood at 2.9% as of August 2025, while the core inflation rate (excluding food and energy), was 3.1%. The Federal Reserve's preferred inflation measure, the PCE index, stood at 2.7%. While a higher inflation rate may support the country’s debt repayment capacity, it also raises the likelihood of higher risk premiums over the medium-term, exacerbating public finance vulnerabilities. Against this backdrop, Scope also notes the administration’s deregulatory stance in the financial sector, which may heighten vulnerabilities to financial crises.

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. Scope expects the US dollar to remain in this role, even as the USD share of official foreign exchange reserves has been on a declining trend, falling from 65.7% in 2015 to 57.8% in 2024, as reserves held in other currencies or gold have increased⁶. These factors provide unmatched flexibility in government financing and help mitigate long-term debt sustainability concerns, despite high public debt levels compared to sovereign peers.

The US credit rating 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 financial deregulation, especially in a scenario of persistently higher borrowing costs.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s view that risks to the ratings are balanced over the coming 12 to 18 months.

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

1. Stronger fiscal outlook including a significant improvement in the debt-to-GDP trajectory; and/or
    
2. Stronger economic outlook over the medium term.

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

1. Evidence of a significantly reduced role for the US dollar as the global reserve currency, leading to lower global demand for US Treasuries;
    
2. A significant increase in debt sustainability concerns due to prolonged increases in the debt-to-GDP ratio; and/ or
    
3. A material weakening in the fiscal and/or economic outlook resulting from a large shock such as a financial or prolonged debt ceiling crisis.

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) where 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 to peers.

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) macro-economic stability and sustainability; iii) debt profile and market access; iv) external debt structure; v) resilience to short-term external shocks; and vi) banking sector performance. Conversely, relative QS credit weaknesses are signalled for: i) fiscal policy framework; ii) long-term debt trajectory; iii) environmental factors; iv) social factors; and v) governance factors.

On the aggregate, the QS generates no positive or negative 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.

The United States receives a relatively high SQM score in respect of climate-related natural disaster risks as captured by the ND-GAIN Index, signalling greater resilience to a range of potential environmental hazards compared with peers. However, the country receives a very low score for greenhouse gas emissions per capita, one of the lowest scores in its peer group for carbon emissions per unit of GDP, 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 403 significant climate disasters since 1980⁷. These present an aggregate price tag of around USD 2.9tr with 25.6% of the total cost arising over the past 5 years, accounting for around 3% of GDP. Under the second Donald Trump administration, the US withdrew from the Paris Climate Accords for a second time, repealed or weakened environmental rules, reiterated its commitment to fossil fuel development and deregulation, significantly cut funding for climate-related research activities, froze or rescinded environmental and renewable energy grants created under the previous administration, and cancelled climate-related federal support to states. 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 the lowest score among peers on income inequality, as measured by the income share held by the bottom 50%. On labour-force participation, the US scores below average as labour-force participation (of those aged 16+) remains below pre-pandemic levels at 62.3% as of August 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 significantly impacting social issues in the United States. This includes a focus on deregulation which is likely to result in a reduction in consumer protection measures, planned cuts in healthcare, the undermining of media and academic freedoms, and a strong focus on dismantling diversity, equity and inclusion programs across federal agencies and in the private sector. Scope assigns a ‘weak’ 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 five World Bank world governance indicators (WGIs), although scores have weakened in four out of the five indicators over the decade 2013 to 2023 (reflecting the latest available data). Notable decreases in the scoring are for the indicators measuring ‘voice and accountability’ and ‘control of corruption’, but also the indicator measuring ‘political stability and absence of violence / terrorism’ which Scope uses to assess political risk. While the United States continues to benefit from resilient democratic institutions, Scope considers that some of the checks and balances protecting accountability and transparency have been eroded under the current administration. President Trump set a record for the number of executive actions signed during his first 100 days in office, with the total number of executive orders reaching 210 to date⁸. 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, October 2025
2. Bloomberg, Bessent on Tariffs, Deficits and Embracing Trump’s Economic Plan, August 2025
3. Department of the Treasury and the Bureau of the Fiscal Service, Fiscal Data, October 2025
4. Congressional Budget Office, The Long-Term Budget Outlook: 2025 to 2055
5. IMF Fiscal Monitor, October 2025
6. ECB, Gold demand: the role of the official sector and geopolitics, June 2025
7. National Centers for Environmental Information, Billion-Dollar Weather and Climate Disasters, October 2025
8. Federal Register, 2025 Donald J. Trump Executive Orders, October 2025

Methodology
The methodology used for these Credit Ratings and Outlooks, (Sovereign Rating Methodology, 27 January 2025), is available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The model used for these Credit Ratings and Outlooks is (Sovereign Quantitative Model Version 4.1), available in Scope Ratings’ list of models, published under 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 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 scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at 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 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: Alvise Lennkh-Yunus, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings in January 2003. The Credit Ratings/Outlooks were last updated on 9 May 2025.

Potential conflicts
See 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.