Fitch warns US debt burden is ‘far above’ other AA rated nations
All three major rating firms have the US pegged one level below triple-A
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FITCH Ratings is warning the US’s credit grade faces the challenges of a widening deficit that leaves its debt burden “far above” other nations that share its AA score.
Deterioration is likely in the US fiscal position this year due to tax cuts in the One Big Beautiful Bill Act, despite offsets from tariff revenue, a Fitch team including Richard Francis and Shelly Shetty wrote in a Thursday report. That emphasises the importance of November’s Congressional mid-term elections, they wrote.
“The mid-terms could provide additional checks and balances to executive powers if the Democrats gain control of one or both houses of Congress,” they wrote. “However, divided government could make negotiating fiscal packages more difficult and raise brinkmanship risks, including on the debt ceiling,” which Fitch expects to be reached in the second half of 2027.
Fitch downgraded the US in August 2023 by one level to AA+, citing concerns about political wrangling over the debt ceiling that took the nation to the brink of a default.
Fitch said in the report that the current stable rating “already incorporates a long-running deterioration in governance, particularly in fiscal policy making.”
Fitch expects a general government deficit of 7.9 per cent of gross domestic product this year and next and noted the uncertainty of tariff revenues and President Donald Trump’s call for higher defence spending.
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The rating company reduced its estimate for tariff revenue, net of refunds, to US$150 billion for 2026 after the Supreme Court struck down duties imposed under the International Emergency Economic Powers Act.
Still, Fitch said strengths for the US credit rating include the dollar’s role as the global reserve currency, a large and dynamic economy and the depth and liquidity of capital markets.
All three major rating firms have the US pegged one level below triple-A, with stable outlooks. Last May, Moody’s lowered the US credit score to Aa1 from Aaa, joining Fitch and S&P in no longer grading the world’s biggest economy as a triple-A sovereign borrower. BLOOMBERG
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