The United States has received its precious highest credit rating for the first time due to fears that the Trump administration won’t defend against its rising debt.

Moody's lowered the U.S. credit rating to AA1 amid warnings about deficits and debt interest costs, down a notch from AAA.

The U.S. has now lost the third ratings of all three major credit rating agencies after Fitch made a similar downgrade in 2023. Standard & Poor's Global was downgraded to the United States in 2011.

This means that the United States no longer claims to hold respected ratings, which allows countries to borrow at the lowest tax rate.

Moody's said its actions “reflected the growth of government debt-to-interest payment ratios over a decade, with a significantly higher level than sovereigns with similar ratings.”

However, the agency said the president's plan played a role in the decision to downgrade as it warned that U.S. financial situation was deteriorating.

"The U.S. fiscal performance may worsen relative to its past and be compared with other highly rated sovereigns," it said.

This will put further pressure on the U.S. budget when Mr. Trump tries to get a major tax cut signed by lawmakers.

Downgrade means higher risks to U.S. government debt. This, in turn, could mean bond investors may demand higher yields on U.S. Treasuries, further increasing borrowing costs.

On Friday, tough conservatives blocked Mr. Trump’s huge taxes and spent the bill beyond the cost issue.

Moody's said Trump's plan to expand the 2017 tax cuts and jobs bill will increase the deficit by $4 trillion over the next decade.

Moody's said the debt interest cost and low tax revenue mean that the deficit will rise to nearly 9% of GDP by 2035, up from 6% in 2024.

The U.S. federal government debt will increase to 134% of GDP over the same period, up from 98% in 2024.

Mr. Trump's plan has been challenged by the cost of borrowing in the United States. The radical "countdown" tariffs he announced in early April were forced to return after the bond market opposed him.

As investors quickly cut U.S. assets, increasing government debt costs and forced him to announce a policy a week later, his “liberation day” tariffs issued yields on U.S. Treasuries.

U.S. debt has climbed rapidly for more than a decade because the government operates so much, meaning it spends more than revenues in tax revenue. Now close to $37 trillion.

This accelerated during the pandemic when the U.S. increased spending. Meanwhile, tax reductions such as those proposed by Mr. Trump during his first term have been reduced.