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S&P Global Maintains U.S. Credit Ratings Amid Fiscal Shifts

S&P Global reaffirmed its AA+ rating on long-term U.S. sovereign debt and A-1+ rating on short-term unsolicited sovereign credit, noting that revenues from President Donald Trump’s expanded tariffs are expected to largely offset weaker income caused by his recently enacted “Big Beautiful Bill”, a major tax-and-spending legislation.

The rating agency highlighted that while the new law reduces federal tax revenue and adjusts spending, tariff collections provide a meaningful fiscal cushion, helping maintain U.S. credit strength. The Treasury Department reported that U.S. customs duties surged by nearly $21 billion in July due to Trump’s tariffs, partially countering the impact of the tax cuts.

Projected Fiscal Impact of the Big Beautiful Bill

The Congressional Budget Office (CBO) estimates that the law will add $3.4 trillion to the federal deficit from 2025 through 2034. This reflects a $4.5 trillion decline in revenue and a $1.1 trillion reduction in direct spending, signaling that while spending cuts are implemented, tax reductions outweigh them.

S&P emphasized that effective tariff revenue, bolstered by high import levies, will “generally offset weaker fiscal outcomes” that might have otherwise pressured the U.S. budget.

Risks and Long-Term Outlook

Despite a stable outlook, S&P cautioned that the rating could face downward pressure over the next two to three years if deficits rise further due to political challenges in managing spending or revenue. Concerns also remain about institutional strength, long-term policymaking effectiveness, and Federal Reserve independence, factors crucial to maintaining the dollar’s status as the world’s primary reserve currency.

S&P’s outlook assumes the U.S. economy will remain resilient and diverse, with credible monetary policy and high but stable fiscal deficits, supported in part by the $5 trillion increase in the debt ceiling. The agency projects that broad revenue inflows, including robust tariff income, will continue to offset fiscal slippage from tax reductions and spending increases.

Broader Economic Context

President Trump’s administration has aggressively expanded tariffs across multiple sectors, aiming both to protect domestic industries and to generate additional government revenue. While tariffs have created short-term revenue gains, the broader impact on imports, inflation, and global trade dynamics continues to be closely monitored by economists and credit agencies alike.

S&P’s analysis underscores the delicate balance policymakers face: leveraging tariff inflows to support federal finances while managing the long-term effects of large-scale tax cuts and deficit growth. With the U.S. maintaining strong economic fundamentals, the agency expects fiscal challenges to remain manageable in the near term, though vigilance is needed to maintain the AA+ rating.

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