Global corporate defaults rose in Q2 2025 but the year to date tally is 19% lower than what was recorded in the same period last year. Moreover, although analysts anticipate a slowdown in economic growth later this year and into 2026 due to higher final tariffs, there is no forecast for any recessions, and defaults are anticipated to remain stable. However, some sectors may be more affected by where tariffs land, and temporary inflation increases could delay Fed interest rate cuts.
According to S&P Global ratings, global corporate defaults rose to 37 in the second quarter from 26 the previous quarter. However, the agency qualifies that the year-to-date tally of 63 defaults is 19% lower than the 78 recorded during the same period last year.
The consumer products and chemicals, packaging, and environmental services sectors led defaults with six each, followed by media and entertainment with five and health care and telecom with four apiece. These five sectors accounted for over two-thirds of second-quarter defaults.
Figure 1-2025 quarterly corporate defaults
Source: S&P Global ratings
S&P states: ‘’All major regions saw defaults increase in the second quarter relative to the previous quarter. The U.S. and Europe each recorded four more defaults. On a relative basis, emerging markets saw the highest increase to three from just one in the first quarter.’’
The rating agency continues: ‘’Our existing base-case forecasts see the U.S., European, and Asia-Pacific trailing-12 month speculative-grade corporate default rates reaching 4.0%, 3.6%, and 2% respectively by March 2026. Our pessimistic-case forecasts see those default rates reaching 5.5%, 5.25%, and 4.25%, respectively.’’
Still, although overall default stability persists, the agency qualifies that downgrades predominated in the second quarter as tariff uncertainties rose. In particular, downgrades surged by nearly 50% relative to the previous quarter, while upgrades decreased by 5%. As a result, downgrades outnumbered upgrades for just the second time since fourth-quarter 2023.
However, the rating agency notes that downgrades were predominately among speculative-grade issuers (82%). Consumer products and chemicals, packaging, and environmental services lead downgrades (19 apiece). Financial institutions led upgrades for the fifth consecutive quarter (22), and over three-quarters of these were upgrades of European issuers.
Negative rating activity was most pronounced in the U.S., where downgrades rose 52% and upgrades
