BANK of Jamaica (BOJ) governor Richard Byles has issued a stark warning that America’s spiralling budget deficits now present a more severe danger to the global economy than ongoing trade conflicts, as the world’s largest economy grapples with its third credit rating downgrade since 2011.

His comments follow Moody’s recent decision to cut the US government’s credit rating from its top-tier Aaa to Aa1, citing concerns over its US$36-trillion debt burden — which now exceeds the nation’s US$30 trillion GDP. The move has sent ripples through financial markets and could complicate US president Donald Trump’s push for further tax cuts.

“What it is saying is that all the rating agencies are now aligned, that the big problem the United States faces is the fiscal deficit,” Byles told reporters in Kingston recently. “And that deficit is what’s driving the rating agencies to downgrade.”

Moody’s, in notes accompanying its downgrade, warned of “significantly higher” US borrowing costs compared to peers, joining Fitch which issued a downgrade in 2023 and Standard & Poor’s which in 2011, stripped America of its pristine AAA status. But, while global attention has focused on Trump’s tariff battles — including a recent US court ruling that found his steel/aluminum levies unlawful — Byles argued fiscal instability poses graver consequences.

“We have spent a lot of time and angst looking at tariffs, but the United States faces a bigger issue with their fiscal deficit,” Byles continued. “That can have implications for world trade and economies dealing with the US,” he added.

The International Monetary Fund (IMF) had already projected 2025 global growth to slow to 2.8 per cent from 3.3 per cent in 2024, partly due to the trade tensions. However, Byles emphasised that debt-driven market volatility could exacerbate the slowdown.

“And that can have implications for world trade and for economies that deal with the United States. So that is something that we are watching very carefully,” he confirmed.

Jamaican manufacturers have already begin to outline how the trade war is impacting their efforts to sell into the United States, with some saying that distributors have asked them to absorb a portion of the tariffs, a request they have rejected in some cases.

Economists have warned that without US fiscal reforms, emerging markets may face capital flight and currency pressures. Jamaica’s sovereign debt, currently at 68 per cent of GDP, could become more expensive to service if global interest rates rise due to US market turbulence — the proverbial cold Jamaica catches when America sneezes. The downgrade could also see investors flee US treasury securities, weakening the US dollar and reducing the value of earnings from remittances and tourism.

Earlier this week, a surprise ruling by the US Court of International Trade threatened to invalidate Trump’s “Liberation Day” tariffs — sweeping duties affecting most trading partners, with additional levies targeting Canada, Mexico and China over fentanyl-related trade disputes. The court found Trump had unconstitutionally bypassed Congress by using emergency powers to impose the tariffs.

However, a federal appeals court temporarily reinstated the tariffs on Thursday, creating new uncertainty for global commerce. The stay gives the administration until June 9 to file its appeal, while affected nations must respond by June 5.

Trump has argued that his trade policies will stoke economic growth in the future, though many economists predict the opposite.