Mounting trade and budget deficits are pushing the US economy into increasingly precarious territory, LSEG Data & Analytics has reported.
Recent figures point to a rapid deterioration in the country’s credit profile, with the widening gaps also driving a steepening in the yield curve, it said.
Fresh data highlights a sharp 41.3% jump in pre-tariff imports in early 2025, lifting total imports to $346bn by March and sending the trade deficit to $163bn. Consumer goods and capital equipment dominated the surge as companies sought to stockpile ahead of expected tariff hikes. The influx came despite the US economy contracting by 0.3% in Q1 2025, weighed down by weaker government spending and higher imports, both of which cut into GDP growth, it said.
The imbalances have already taken a toll on the US credit profile. Moody’s has downgraded the country’s long-term issuer and senior unsecured ratings from Aaa to Aa1, citing rising fiscal deficits and growing interest payments on federal debt. Following the downgrade, the five-year credit default swap spread on US debt widened by 20 basis points, leaving it trading above peers such as Austria and Finland.
The 30-year US Treasury yield touched a 19-month peak in May as fiscal concerns mounted, LSEG claims. This comes as the US Congress passed a new tax bill extending $4.5tn in Trump-era tax breaks, which the Congressional Budget Office estimates will push the budget deficit towards 7% of GDP in coming years. The Committee for a Responsible Federal Budget has placed the bill’s cost at $3.1tn over the next decade, equivalent to roughly 11% of US GDP.
Looking ahead, the US debt-to-GDP ratio is projected to rise by 8–10% within the current term. LSEG Data & Analytics analysis shows that a 10% increase in the debt-to-GDP ratio could push long-term bond yields nearly 100 basis points higher. After breaching 5% in 2025, the 30-year yield could move past 6% before the end of the presidential term.
For more insights about the US budget and trade deficits, read the full story here.
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