Recent analyzes have warned that the United States may face a new reduction in its credit classification, which may lead to a great shock in the financial markets, at a time when economic and political pressures are increasing due to the escalation of trade war with China and high levels of public debt.
According to a report published by Forbes Magazine, credit rating agencies, led by Standard & Poor’s, are closely monitoring the deterioration in American economic indicators, which makes reducing classification from the current level “AA+” to the lowest level of “possible occurrence and not excluded.”
Shying economic indicators
The report states that the American economy, compared to 2011, when Standard & Poor’s first ranked the first time in history, is in worse. Although inflation is now 2.4% (compared to 3% in 2011) and the unemployment rate at 4.2% (compared to 9% in 2011), the size of the national debt jumped to 36.2 trillion dollars, equivalent to 124% of GDP, compared to 14.8 trillion dollars (95% of the GDP) 14 years ago.
The cost of debt service has also increased dramatically, as the United States is expected to pay 952 billion dollars in its debts during 2025, compared to only 230 billion dollars in 2011.
The report pointed out that the main interest rates (federal) are currently 4.3%, which is much higher than the levels near the zero that prevailed after the 2008 crisis, which adds an additional burden to the cost of borrowing.
Commercial escalation increases pressure
Forbes emphasized that the escalation of the trade war between the United States and China is an additional factor that may accelerate the occurrence of credit reduction, as the new customs duties raise inflationary pressures, increase the cost of borrowing and weaken confidence in the American economy.
She stated that financial markets are witnessing severe fluctuations due to these concerns, as the Standard & Poor’s index recorded 500 daily losses of $ 3 trillion, followed by daily gains of a trillion dollars, which reflects the state of sharp uncertainty among investors.
“Investors do not like the risks, and certainly do not like these high levels of risk,” the report said, noting that foreign investment institutions have begun to reduce their possessions of stocks, bonds and US dollars.
A confident political crisis
On the other hand, the Forbes report indicated that the continuation of the sharp differences between the Democratic and Republican parties, in addition to the internal divisions within the Republican Party itself, brings to mind the atmosphere of “political manipulation” that accompanied the reduction of the 2011 classification, which makes the repetition of the scenario a favorite.
Forbes also noted that classification agencies, which have been under political pressure in the past, have become more cautious today. After Fitch reduced the American ranking in 2023, Moody’s kept the AAA classification but with a negative future look.
In a statement issued this month, Standard & Poor’s indicated a set of economic risks that may require the classification, which Forbes believes that it has become more likely to exacerbate the situation.
Forbes concluded its report by saying that the financial markets so far “ignore the risks”, but “economic, financial and political cracks expand”, which makes the real question is not “whether” the American credit rating will be reduced again, but “when” will happen.
Forbes advised investors to prepare for the worst scenario by adopting high -quality investment portfolios capable of bearing shocks and superior to the market performance during the difficult periods.
