by Ruth Carson
S&P Global Ratings said 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.
While Trump’s trade war has roiled markets, unnerved foreign governments and provoked criticism from leading economists, S&P affirmed its AA+ long-term rating for the US.
This is in part because it reckons money flowing from the levies will offset the impact on the US’s budget position from the recent tax and spending bill. It kept the outlook for the long-term rating stable.
“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,” analysts including Lisa Schineller wrote in a report.
The decision offers a glimmer of good news for Trump by endorsing one of his arguments that imposing tariffs is already helping to improve the nation’s fiscal position. Tariff revenue reached a fresh monthly record in July, with customs duties climbing to $28 billion.
The views of ratings agencies have had an important impact on the world’s biggest bond market this year. Yields on 30-year Treasuries jumped above 5% in May as tariff fears and Trump’s multi-trillion dollar tax bill roiled global markets.
On Tuesday however the 30-year yield inched higher to around 4.94%, while those on benchmark 10-year yields edged up to 4.34%, pointing to a muted short-term impact from the S&P report.
S&P said the stable outlook indicates its expectation that while the fiscal deficit won’t meaningfully improve, it also won’t persistently deteriorate over the next several years. The agency expects net general government debt to surpass 100% of GDP over the next three years, but it thinks the general government deficit will average 6% from 2025 to 2028, down from 7.5% last year.
Whether tariffs will give the US a meaningful revenue boost is a subject of debate among economists, who point to an apparent contradiction at the heart of Trump’s approach: 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.
The White House didn’t immediately reply to a request for comment out of hours.
US Treasury Secretary Scott Bessent has said tariff revenues for all of 2025 could be “well in excess of 1% of GDP,” revising his previous estimate of $300 billion. But the bipartisan Congressional Budget Office estimates the recently passed budget bill will add $3.4 trillion to the deficit over the next 10 years.
“These are still small nuances close to the top of the credit ratings hierarchy and it doesn’t signal any material change in the US fiscal health, which is a complex issue,” said Homin Lee, senior macro strategist at Lombard Odier Ltd. in Singapore.
“The pressures on the Fed to again consider defying rates markets and hold next month just received a (rather modest) boost as S&P Global Ratings delivered a solid report card for the US’s economy and outlook.”
Garfield Reynolds, MLIV Team Leader.
The US lost its last top rating from the big three credit companies in May, when Moody’s Ratings lowered the country from Aaa to Aa1. It blamed successive administrations and Congress for swelling budget deficits that it said show little sign of abating. Fitch Ratings and S&P had previously downgraded the US from AAA.
The S&P report could be a positive for the dollar after Trump’s tax and spending bill cast doubts on the sustainability of US debt, said Fiona Lim, a senior currency strategist at Malayan Banking Bhd. Still, the more lasting driver for the greenback will come from Federal Reserve minutes, as well as Fed Chair Jerome Powell’s speech in Jackson Hole on Friday, she said. A gauge of the dollar was flat on Tuesday.
Copyright Bloomberg News
Wells Fargo, Commonwealth, UBS are the firms losing advisor teams.
Firms are facing increasing scrutiny over whether they can be held responsible for losses by clients whose ability to understand their investments has been compromised.
Decision deepens the two firms’ decade-long relationship
Linqto Inc. was one of the first tech platforms to promise access to small investors into the high-risk, high-reward world of private investments.
Since Vis Raghavan took over the reins last year, several have jumped ship.
Stan Gregor, Chairman & CEO of Summit Financial Holdings, explores how RIAs can meet growing demand for family office-style services among mass affluent clients through tax-first planning, technology, and collaboration—positioning firms for long-term success
Chris Vizzi, Co-Founder & Partner of South Coast Investment Advisors, LLC, shares how 2025 estate tax changes—$13.99M per person—offer more than tax savings. Learn how to pass on purpose, values, and vision to unite generations and give wealth lasting meaning
