Standard & Poor’s (S&P) Global Ratings has reaffirmed the United States’ sovereign credit rating at ‘AA+’ with a stable outlook, offering a rare moment of fiscal reassurance amid persistent debates over government spending, tariffs, and the nation’s ballooning debt. The decision, announced late Monday, August 18, 2025, comes as the U.S. grapples with a complex economic landscape shaped by President Donald Trump’s aggressive trade policies and a sweeping tax-and-spending package known as the ‘One Big Beautiful Bill Act.’
The S&P’s decision to maintain the ‘AA+’ rating—the same level assigned since the 2011 downgrade from the top-tier ‘AAA’—was attributed to several key factors. According to S&P’s note, the “continued resilience in the U.S. economy, credible, effective monetary policy execution, high, but not rising, fiscal deficits that underpin the increase in net general government debt, and the $5 trillion increase in the debt ceiling” all contributed to the stable outlook.
But perhaps most notably, S&P cited revenues from President Trump’s tariffs as a crucial offset to the fiscal impact of the administration’s recent tax cuts and spending increases. As Bloomberg reported, “revenues from Donald Trump’s tariffs will help soften the blow to the US’s fiscal health from the president’s tax cuts, enabling it to maintain its current credit grade.”
Trump’s trade war, launched after his return to office in January 2025, has seen the imposition of a baseline 10% tariff on all imports, with additional duties targeting specific products and countries. While these moves have rattled global markets and drawn criticism from economists, the resulting surge in customs revenue has been impossible to ignore. In July 2025 alone, customs duty collections soared to $28 billion—a fresh monthly record, according to Bloomberg. For the fiscal year-to-date, customs revenue reached $135.69 billion, more than double the $62.74 billion collected over the same period last year, as detailed in the Treasury Department’s monthly budget report.
Despite this windfall, the U.S. government’s fiscal challenges remain daunting. The July 2025 deficit stood at $291.14 billion, pushing the fiscal year-to-date deficit to a staggering $1.63 trillion. S&P projects that net general government debt will approach, and likely surpass, 100% of GDP within the next three years, driven by rising nondiscretionary interest payments and aging-related expenditures. The general government deficit is expected to average 6% of GDP from 2025 to 2028—down from 7.5% in 2024 and a 9.8% average between 2020 and 2023, but still substantial by historical standards.
“Amid the rise in effective tariff rates, we expect meaningful tariff revenue to generally offset weaker fiscal outcomes that might otherwise be associated with the recent fiscal legislation, which contains both cuts and increases in tax and spending,” S&P analysts, including Lisa Schineller, wrote in their report. The agency’s outlook assumes that “broader revenue buoyancy, including robust tariff income,” will help cushion the blow from any fiscal slippage.
The ‘One Big Beautiful Bill Act,’ signed into law by President Trump in July 2025, made his 2017 tax cuts permanent and introduced new tax breaks. While the bill was hailed by supporters as a boon for economic growth and investment, critics, including the nonpartisan Congressional Budget Office (CBO), have warned that it will add $3.4 trillion to the deficit over the next decade.
Debate continues among economists about whether tariff revenues can provide a sustainable fiscal cushion. As Bloomberg noted, “the revenues rely on trade, but Trump has also attempted to pull production back to the US and encourage consumers to buy American-made products—moves that would undercut future levy receipts.” U.S. Treasury Secretary Scott Bessent, however, remains optimistic, estimating that tariff revenues for all of 2025 could be “well in excess of 1% of GDP,” a significant upward revision from previous forecasts.
Market reaction to S&P’s reaffirmation was muted. U.S. bond yields on 10- and 30-year maturities slipped by one basis point to 4.32% and 4.92%, respectively, while a gauge of the dollar dipped 0.1%. The Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100 Index, and the SPDR S&P 500 ETF (SPY) were up over 13% and 10% for the year, reflecting investor confidence in the broader economy despite fiscal uncertainties.
S&P’s stable outlook is not without caveats. The agency warned that a rating cut could be on the horizon within two to three years if deficits worsen, particularly if political gridlock prevents meaningful action on spending and revenue management after the new tax code. Risks also loom from potential threats to the independence of American institutions, such as the Federal Reserve. “This, in turn, could jeopardize the dollar's status as the world's leading reserve currency—a key credit strength,” S&P cautioned. The agency expects the Federal Reserve to “navigate the challenges of lowering domestic inflation and addressing financial market vulnerabilities,” even as Trump has publicly criticized the central bank for not cutting rates more aggressively.
Recent actions by other major ratings agencies underscore the precariousness of the U.S. fiscal position. In mid-May, Moody’s downgraded the U.S. long-term issuer and senior unsecured ratings to Aa1 from Aaa, citing rising government debt and interest costs, though it shifted the outlook from “negative” to “stable.” Fitch, meanwhile, issued its own downgrade in 2023, lowering the U.S. Long-Term Foreign-Currency Issuer Default Rating to ‘AA+’ from ‘AAA.’
For all the attention given to credit ratings, some market observers remain skeptical of their real-world impact. Homin Lee, senior macro strategist at Lombard Odier Ltd., told Bloomberg, “Rating decisions are really just symbolic and they tend to lag the market’s perception shifts.” Others, like Chris Iggo, CIO for core investments at AXA Investment Managers, argue that the “most important factors remain to be inflation, jobs data and the Fed’s stance,” with tariff revenue likely to decline if U.S. consumers increasingly favor domestic goods over imports.
As policymakers and investors look ahead, all eyes are on the Federal Reserve’s annual Jackson Hole gathering, where Chair Jerome Powell is expected to offer clues about the future direction of U.S. monetary policy. With the nation’s fiscal future hanging in the balance, the coming months will test whether the current mix of tariffs, tax policy, and monetary strategy can truly keep America’s credit standing intact—or whether a reckoning is just around the corner.
The S&P reaffirmation may not resolve all doubts about America’s fiscal path, but it does signal confidence in the underlying strength and adaptability of the U.S. economy, at least for now.
