Moody’s Warns: Defaults Rising as Trade War Strains Global Credit

​The global trade war isn’t just rattling markets—it’s now threatening corporate survival.

Moody’s Ratings has raised its forecast for speculative-grade defaults, now expecting a 3.1% default rate by year-end, up from 2.5%. While still below last year’s figure, the agency warned that a deeper shock could push that number as high as 6%.

The culprit? A combination of Trump’s sweeping tariffs, slower growth, and tightening financial conditions. Moody’s estimates the tariffs alone could shave a full percentage point off U.S. GDP, with ripple effects hitting economies across the globe.

“We’re seeing a clear shift in financing conditions,” said Sharon Ou, one of the report’s authors. “Borrowers are facing more resistance, and investors are turning risk-averse.”

The first quarter already saw signs of stress: 27 corporate defaults, led by sectors like healthcare, business services, retail, hotels, and telecoms.

Credit strategists are now scrapping earlier 2025 forecasts and bracing for wider spreads, lower growth, and a cooler appetite for high-yield debt.

Moody’s isn’t saying a credit meltdown is guaranteed—but the warning is clear: if the trade war drags on or inflation flares up, default risks could spike fast.

​Bottom line: As tariffs mount and capital tightens, riskier companies are feeling the squeeze. Moody’s latest warning makes one thing clear—the credit cycle is turning.