Trump's Collision Course With Credit Rating Agencies: What to Expect

Yali N’Diaye is a former financial reporter with Market News International who covered financial regulatory reform after the global financial crisis, including reliance on rating agencies. A criminal investigation of the head of the central bank, which is happening in the United States, sets a new type of precedent. As Federal Reserve Chair Jerome Powell said himself this month in an unexpected Sunday night video: “This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether instead monetary policy will be directed by political pressure or intimidation.” In tandem with this war on the Fed, U.S. President Donald Trump’s lust for Greenland, and the ensuing fallout, has caused investors to dump American bonds. Tuesday morning, U.S. 30-year Treasury yields were up by about seven basis points to 4.91 per cent. (A basis point is one-hundredth of a percentage point, and bond yields move inversely with prices.) And over the last two trading days, those yields have been up by 12 basis points, the biggest jump over such a period since China-U.S tensions flared in the middle of last year. Bessent says it would be a ‘mistake’ for Powell to attend Supreme Court hearing on Lisa Cook’s removal When investors sell off Treasuries, it is an explicit signal that they deem the United States to be less creditworthy. This chaos will surely ripple forth, its impact spreading far and wide. One party pulled into it could be the credit rating agencies. When S&P Global downgraded the U.S. sovereign rating in August, 2011, it cited “political risks” along with budget deficit concerns, drivers that also led Moody’s to lower the rating in 2025. That same month, Fitch Ratings maintained its “stable” outlook. But all three agencies stressed the weakening state of America’s public accounts and the political gridlock around the public debt ceiling process. It was the dollar that saved the United States from a worse assessment. The three agencies consistently agreed on the supporting role of the U.S. dollar as the world’s dominant reserve currency, raising the tolerance for deteriorating public accounts in the United States relative to other countries. That assessment is now more cautious. The United States has suffered two more downgrades, from Moody’s and Fitch. The tenuous peace between Trump and the $30 trillion U.S. bond market Fitch, which downgraded the U.S. rating in 2023 to double-A-plus from triple-A, said that support provided by the U.S. dollar could crack under the weight of a decline in “the coherence and credibility of policymaking that undermines the reserve currency status,” which would reduce that financing flexibility. While the U.S. dollar remains the dominant reserve currency, its share of international reserves has been slowly declining to 56 per cent in the second quarter of 2025 from 62 per cent in 2010. The lone factor that the credit agencies have not criticized has been the credibility of the Federal Reserve, which has also been a historic support for the U.S. sovereign rating. With the criminal investigation into Mr. Powell, that might now change. In response to such developments, Fitch had reminded investors of the key role that the Fed’s independence plays in the U.S. credit rating, which could signal a red line for all rating agencies. S&P 500, Nasdaq slump to one-month lows as Greenland dispute triggers global selloff Tuesday’s sell-off of Treasuries thus represents a heavy blow to the already fragile foundation. The sell-off had come after the Danish pension fund AkademikerPension said it would get rid off US$100-million of Treasuries by the end of the month. While the fund’s investment director insists it had nothing to do with Mr. Trump’s desire for Greenland, he did say the President’s designs on the island “didn’t make it more ‍difficult to take the decision” to divest. If down the line rating agencies downgrade the United States further, it could put them squarely in Mr. Trump’s crosshairs. Two years after S&P Global delivered its U.S. downgrade in 2011, the federal government filed a lawsuit against the rating agency for assigning “artificially high” ratings to mortgage-backed securities leading up to the global financial crisis. Noting that a rival that had assigned comparably high ratings to such securities was not being investigated, the rating agency argued the Department of Justice was retaliating. The two parties eventually settled. A less prominent rating agency, Egan Jones, was actually the first to downgrade the U.S. in 2011, with another such move in 2012. A year later, it settled with rating agencies’ regulators, the Securities and Exchange Commission, agreeing in the process to be barred from rating government securities issuers for 18 months owing to record-keeping and conflict-of-interest issues. Egan Jones is no longer a nationally recognized statistical rating organization for sovereign ratings. Such enforcement actions raised questions about whether they were simply related to compliance, resulted from political retribution, or both.