International rating agency Moody's released a heavyweight report on Tuesday (March 25th) warning that the US fiscal strength will continue to decline in the coming years. With the soaring budget deficit and sharp reduction in debt burden, the fiscal situation of the United States has "further deteriorated" since the downgrade of its Aaa rating outlook in November 2023. This conclusion directly points to the core risks of the US economy, coupled with market turbulence caused by the Trump administration's tariff policies, and global investors' concerns about inflation and an economic hard landing continue to ferment.

The debt black hole is expanding

Moody's pointed out sharply that even in the low probability scenario of economic optimism, the debt affordability of the United States is still "significantly weaker than other Aaa sovereign countries". The rise in interest rates has led to a decrease in the affordability of government debt, while the expansion of the deficit and the surge in interest payments have further worsened the fiscal outlook.

Policy risk explosion

The report identifies "tax reduction policies without financial support" and "sustained high tariffs" as key risk sources. The Trump administration's imposition of punitive tariffs on major trading partners not only exacerbates financial market uncertainty, but may also trigger price spikes and economic downturns, creating downward pressure on credit ratings.

The final shake of the fortress

Currently, Moody's is the only one among the three major rating agencies to maintain the Aaa rating for US sovereign debt, but its downward revision of its 2023 outlook has released a warning signal. The report emphasizes that the traditional advantages of the US dollar and US bond markets are being forced to take on a "more critical buffering role," but whether this pillar can hedge against fiscal deterioration in the long term remains unknown.

Summary: The foundation of hegemony is facing structural challenges

Moody's warning is not an isolated signal - when the "widening fiscal deficit" and "weakening debt burden" form a death spiral, even if the US dollar hegemony temporarily delays the rating downgrade, the collapse of the US credit advantage may only be a matter of time. The institution bluntly stated that the "significant tail risks" facing the economy may completely tear apart the safety net of Aaa ratings. This crisis, caused by a combination of policy myopia and financial imbalances, is rewriting the fiscal narrative of superpowers.

Moody's warning of US fiscal sustainability has intensified market concerns about economic uncertainty. If the credit rating of US Treasury bonds is further downgraded, it may shake investors' confidence in US dollar assets and drive funds towards traditional safe haven assets such as gold.