The US's last growing concern about Triple A credit rating and government debt has threatened to disrupt relatively mild calm in financial markets since President Trump began suspending tariffs earlier last month.
One of the factors that listen is the Congressional bill that could permanently cut the 2017 taxes and add trillions of dollars to federal debt. The House Committee voted to approve the bill on Sunday night, but was expected to remain the focus of controversial debate.
On Friday, rating agency Moody's cited the law along with broader concerns about the fiscal deficit and increased debt costs when it downgraded the US credit rating. Moody's move means that all three major rating agencies no longer believe that the US is qualified for the highest credit rating.
US stock futures showed that markets would fall by about 1% when they began trading in the US on Monday morning.
During Asian trading, Korean Cospi and Taiwan's Taiex index fell by more than 1%. Stocks in Tokyo and Hong Kong fell by about 0.5%. The US dollar continued to weaken against other currencies, including the euro and yen.
A downgrade to US credit ratings could have an even greater ripple effect through financial markets if it begins to shake up the safe state of Treasury bonds. It could spur global investors to demand higher premiums in exchange for purchasing US debt.
After closing at 4.44% on Friday, Treasury bond yields rose to 4.51% in Asian trading.
Some analysts attribute it to rising yields from existing concerns about Trump's tariff agenda and worsening credit downgrades that exacerbate the impact it has on the US economy.
Last week, US stocks were making strong profits when investors responded positively to US-China deals to cut tariffs.
Analysts say downgrades to US credit ratings can highlight fiscal spending and interest rates that have also been paid to government debt in other countries. This includes Japan, which has one of the highest debt-to-GDP ratios in the world.
When Standard & Pown downgraded US Treasury bonds in 2011, the move contributed to significant volatility in global financial markets. In the US, all three major stock indexes fell, and Asian and European markets also dragged on.
