The downgrade is primarily due to increased policy uncertainty, ongoing trade tensions, and softer demand momentum. Recent tariff measures by the U.S. and countermeasures by trading partners have also contributed significantly to this downgrade.

Global economic growth forecasts have also been negatively impacted, with projections indicating a slowdown. The global growth forecast has been reduced, partly due to these ongoing trade tensions.

The trade war has led to higher production costs and consumer prices in the U.S., while in China, it has contributed to slower economic growth. Both countries have faced economic challenges, and the conflict has prompted supply chain shifts.

U.S. stock markets have seen significant volatility, with sharp declines influenced by ongoing economic uncertainties and President Trump's criticisms of the Federal Reserve. Despite minor rebounds, long-term concerns remain.