Fitch Affirms the United States of America at ‘AA+’, Outlook Stable
Fitch Ratings has affirmed the United States of America’s Long-Term Foreign Currency Issuer Default Rating (IDR) at ‘AA+’ with a Stable Outlook. According to the rating note, the United States’ sovereign rating benefits from its large economy, high per capita income, dynamic business environment, and exceptional financing flexibility due to the U.S. dollar’s role as the preeminent global reserve currency.
However, high fiscal deficits, a substantial interest burden, and high and rising government debt levels—more than double the ‘AA’ rating medians—constrain the rating. The U.S. has not taken meaningful action to address its large fiscal deficits, rising debt burden, or the looming increase in spending tied to an aging population.
The Trump administration has begun implementing its agenda through tax cuts, higher tariffs, and increased deportation of illegal immigrants and reduced federal regulations.
The One Big Beautiful Bill Act (OBBBA), passed in July 2025, fulfills most of Trump’s tax cut pledges. The bill extends most provisions of the 2017 Tax Cuts and Jobs Act and expands deductions to state and local taxes, as well exemptions for overtime and tips, among others.
It partially offsets tax cuts by reducing Medicaid and food stamps but boosted spending on national defense and homeland security to beef-up border security and increase deportations of illegal immigrants.
Fitch forecasts the 2025 general government (GG) deficit will narrow to 6.9% of GDP from 7.7% in 2024, driven by a significant rise in revenues. Federal government revenues are increasing rapidly, supported by resilient economic growth, solid stock market performance, and a surge in tariff revenues.
With the effective tariff rate rising sharply to a Fitch-estimated 16% as of August from 2.3% at YE 2024, ratings analysts expect tariff revenues to reach USD250 billion this year, up from USD77 billion in 2024.
Fitch forecasts GG deficits will rise to 7.8% of GDP in 2026 and 7.9% of GDP in 2027. Over the past 20 years, GG deficits have averaged 1.1% of GDP higher than the federal deficit.
Government revenues will fall, driven by additional tax exemptions on tips and overtime, expanded deductions for state and local taxes (SALT), and additional deductions for people over 65 included in the OBBBA, despite the continued increases in tariff revenues, which Fitch expects to average USD300 billion in both years.
Spending as a share of GDP will rise given, reflecting ongoing growth in healthcare and Social Security expenditures. The GG interest-to-revenue ratio is expected to reach 13.1% by 2027, compared to the forecast ‘AA’ median of 3.6%.
Fitch forecasts the GG debt-to-GDP ratio will rise throughout the forecast period, reaching 124% by YE 2027—a year later than previously projected—up from 114.5% at YE 2024.
This debt level is more than double the ‘AA’ median of 48.1% of GDP at YE 2024. Fitch’s debt dynamics model indicates that the medium-term debt trajectory remains upward, increasing the U.S.’s vulnerability to future economic shocks.
Despite the rising debt, the federal government continues to benefit from exceptional financing flexibility due to the U.S. dollar’s reserve currency status.
The OBBBA raised the debt ceiling by USD5 trillion to USD41.1 trillion. Given Fitch’s federal deficits projections, we expect the ceiling will not be reached until after 2026 mid-term elections.
Following the debt ceiling increase in early July, the Treasury has started rebuilding its cash position. Rating analysts project the cash balance will reach approximately USD800 billion by YE 2025, up from USD313 billion in early July before the ceiling increase.
Frequent criticism by the U.S. administration of Federal Reserve Chairman Jerome Powell and the exit of the Bureau of Labor Statistics head have raised concerns about potential interference with economic data and monetary policy.
Alliances and longstanding trade agreements are being called into question as the United States adopts a more unilateral foreign policy stance instead of multilateralism.
Courts are challenging the Trump administration’s tariff policies, public sector layoffs, closure of some U.S. agencies, and other initiatives.
The 2026 mid-term Congressional elections will influence the balance of power in Congress and the administration’s ability to pass legislation. Judiciary decisions on cases such as tariffs will also influence policy outcomes.
Despite the rising debt level, the federal government maintains strong financing flexibility due to the U.S. dollar’s dominant share (58%) in global reserves.
The dollar remains the most important currency for global trade, payments and financial markets. Although its share has gradually fallen over the past two decades, Fitch expects the U.S. dollar’s predominant reserve currency status to continue for the foreseeable future, despite increased U.S. policy uncertainty and concerns about the possible erosion of institutional checks and balances.
Since May 2025, U.S. Treasuries auctions indicate that foreign investors remain net purchasers of U.S. treasury securities. The share of foreign ownership in U.S. Treasuries has held steady at close to 30%. Higher tariffs, government spending cuts, tighter border controls and deportations, and a surge in policy uncertainties have slowed consumer spending and business investment.
Labor demand has weakened, and job creation has dropped significantly. Fitch forecasts average annual U.S. economic growth to decelerate to 1.5% in 2025 from 2.8% in 2024. “We expect economic activity to remain subdued at 1.5% in 2026, as continued policy uncertainty, higher inflation, persistent higher for longer interest rates, and a weakening job market all negatively impact consumer spending and business investment.”
Accelerated interest rate cuts in 2026 will help boost domestic demand in the beginning of 2H26, leading to a pickup in growth to 2.1% in 2027. Headline inflation held steady at 2.7% in July 2025, while core PCE inflation, the U.S. Federal Reserve’s key price index, remained sticky at 2.8% in June, above the 2% target.
Although inflation has recently come below expectations and there is only limited evidence of tariff-induced increases in core goods prices, Fitch forecasts year-end CPI will rise to 3.8% by December as goods prices pick up over the remainder of the year.
Given inflationary pressures from tariff hikes and rise in some measures of medium-term inflation expectations, the Fed is likely to remain cautious on rate cuts. Fitch anticipates one 25bp cut this year, followed by three in 2026. #Fitch Affirms the United States of America at ‘AA+’, Outlook Stable CBN Sells $166m to Banks, FX Forward Contracts Depreciate
