Moody’s strips US of last triple-A credit rating over soaring debt: What it means for Trump

The United States lost its final top-tier credit rating on Friday as Moody’s Investors Service downgraded the country’s long-held Aaa rating to Aa1, citing ballooning government debt and persistent deficits.The move undermines President Donald Trump's economic narrative just as his flagship spending bill faces setbacks in Congress.The downgrade coincided with the failure of Trump’s proposed multi-trillion dollar tax and spending legislation to pass a key vote, stalled by Republican fiscal conservatives.Moody’s decision follows similar downgrades by S&P in 2011 and Fitch in 2023, leaving the United States without a single triple-A rating from the major credit rating agencies.Explaining its rationale, Moody’s said the shift was due to “the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns.”The agency projected federal deficits will rise to nearly 9% of GDP by 2035—up from 6.4% in 2023—driven largely by surging interest costs, entitlement spending, and limited revenue growth. As a consequence, US federal debt is expected to reach 134% of GDP by 2035, up from 98% last year.In response, the White House defended its fiscal record, and campaign communications director Steven Cheung lashed out at Moody’s Analytics chief economist Mark Zandi. “Nobody takes his 'analysis' seriously. He has been proven wrong time and time again,” Cheung posted on X.Moody’s noted the downgrade reflected Washington’s repeated inability to address structural fiscal challenges. “Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs,” the agency said, adding, “We do not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration.”While Moody’s outlook was revised from “negative” to “stable,” it warned the nation’s fiscal standing is weakening “relative to its own past and compared to other highly-rated sovereigns.”Congressman French Hill, chair of the house financial services committee, called the downgrade “a strong reminder that our nation's fiscal house is not in order,” pledging that republicans would work to “restore fiscal stability, address the structural drivers of our debt, and foster a pro-growth economic environment.”The timing of the downgrade is politically charged. Trump’s proposed “big, beautiful” spending bill which includes a $5 trillion extension of his 2017 tax cuts and controversial reductions to Medicaid is a cornerstone of his campaign messaging on economic stewardship.Despite the downgrade, Moody’s acknowledged US economic strengths, saying the country “retains exceptional credit strengths such as the size, resilience and dynamism of its economy and the role of the US dollar as global reserve currency.”