Ratings Agency Issues US Downgrade Warning as Trade War Could Boost Alternatives to the Dollar

European rating agency Scope has issued a warning regarding a potential downgrade of the US sovereign credit rating due to uncertainty surrounding US trade policy. The agency outlines three possible scenarios for the credit outlook: a “tariff-light” approach, a full-scale trade war, or a broader economic and financial crisis that could include the introduction of US capital controls. Alvise Lennkh-Yunus, head of sovereign and public sector ratings at Scope, noted that the recent announcement of US trade tariffs represents a significant escalation in protectionist policies, which could lead to the largest peacetime trade shock in over a century. The impact on growth, inflation, and public debt will depend on the macroeconomic environment shaped by US policies and the responses of trading partners. Scope emphasizes that the US, as the epicenter of this policy shift, faces significant vulnerabilities, particularly if alternatives to the dollar emerge amid a prolonged trade conflict.