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Fitch Ratings has downgraded its global sovereign outlook for 2025 to “deteriorating” from “neutral,” referring to a worsening assessment of countries’ future creditworthiness due to the intensifying global trade war and ongoing uncertainty surrounding tariff policies.
In its Global Sovereigns Mid-Year Outlook 2025 report released on Tuesday, Fitch noted that the lack of clarity over the duration and outcome of heightened protectionism, driven by U.S. President Donald Trump’s policies, continues to pose a major shock to the global economy.
The agency emphasized that increased tariffs and trade restrictions are undermining global trade volumes, disrupting supply chains, reducing investment, and straining international relations.
In April, U.S. President Donald Trump introduced reciprocal tariffs on all countries for the first time, ranging from a baseline of 10% up to 50%, aiming to reduce the U.S. trade deficit. Although he also paused these tariffs for 90 days to allow time for companies to prepare and for negotiations with major economies, the measures continue to cast a shadow over the global economy as uncertainties remain elevated.
Uncertainty over the scale and timing of these effects also complicates monetary policy decisions, particularly for the U.S. Federal Reserve, while increasing the likelihood of volatility in financing conditions.
Fitch projected that fiscal pressures will remain elevated through 2025, largely driven by increased defense spending, higher interest expenses, demographic shifts, and sluggish economic growth, particularly in advanced economies. The agency estimates that the median government debt-to-gross domestic product (GDP) ratio will inch up to 54.5% by the end of 2025, from 54.1% at the close of 2024.
Falling Brent crude prices—from $79.5 per barrel in 2024 to an expected $65 in 2025—are likely to add further fiscal stress for major oil exporters.
Meanwhile, reduced U.S. international aid raises vulnerabilities for certain emerging markets. However, a weaker U.S. dollar is offering modest relief to some developing economies by easing their debt burdens and allowing room for faster interest rate cuts by central banks.
The agency also highlighted the persistence of high geopolitical risks in its outlook. Ongoing conflicts in Ukraine and the Middle East, strategic tensions between the U.S. and China, and rising social unrest continue to shape an unstable global environment. Additionally, the unpredictable trajectory of U.S. foreign policy contributes further to uncertainty.
Despite the deteriorating global trend, Fitch noted that sovereign rating outlooks are relatively balanced as of mid-2025.
Thirteen countries hold a positive outlook, compared to ten with a negative one.
The agency added that downgrades in previous years have created some room for resilience in current ratings, while effective policy measures could help certain nations defend their creditworthiness in the face of mounting risks.
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