🇺🇸 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. Lennkh-Yunus warned that “in a scenario of a protracted trade war and/or the introduction of US capital controls, viable alternatives to the dollar could emerge,” potentially leading to deeper trade relationships between China 🇨🇳 and the EU 🇪🇺, further opening of China’s capital accounts, or an acceleration of the EU’s Savings and Investment Union, all of which could negatively impact the US credit rating. What do you think about the potential implications of these trade policies on the US economy and credit rating?