Amplified policy uncertainty, and accompanying near-term market volatility, pose a risk to an environment of favorable credit conditions for North American borrowers. Ratings momentum has been positive, with upgrades outpacing downgrades in the first quarter, and the region’s net outlook bias narrowing further. We expect the U.S. trailing-12-month speculative-grade corporate default rate to fall to 3.5% by December. Higher tariffs threaten to reignite inflation and weigh on credit quality for entities exposed to imports and international markets. Borrowing costs could remain high amid increased investor risk aversion, and businesses and consumers could pull back further, leading to sharper-than-expected economic downturns in the region.