Germany was downgraded due to a range of events, including the growing public fear over the influx of migrants and the string of deadly terror attacks in 2016.
The US also fell down the pecking order from fourth to seventh.
Although the report considered the US the world's most powerful nation, 75 per cent of the survey's respondents said they lost respect for the leadership in the White House after Donald Trump was elected.
It holds on to its most powerful tag, beating off the competition on Russia in second.
The US is sandwiched by Sweden in sixth and Australia in eighth in the top ten best countries on the planet, with France in ninth and Norway in 10th.
Brian Kelly, editor and chief content officer of US News said: "We wanted to capture how tumultuous political change can affect a country's perceived standing in the world.
"Similar to what we have done with hospitals, universities and other institutions, the best countries portal pairs fact-based metrics with storytelling to help citizens, business leaders and governments better evaluate their countries and make sense of a range of important global issues."
The list - 2017 Best Countries - is compiled using data gathered from a perception survey which was conducted after the US presidential election.
It considered the views of 21,000 business leaders, informed elites and citizens before ranking them one to 80.
Although not every country in the world is listed, the bottom three are Serbia, Iran and Algeria.
David Reibstein, a professor of marketing at the Wharton School said: 'The Best Countries project allows us to chart how global perceptions of a country affect its prosperity.
"We've learned that a focus on education and citizenship - including human rights, gender equality, religious freedom and more - can drive prosperity more than traditional forms of power, like military prowess."
The top of of the list is dominated - as it was last year - by Nordic nations known for their forward thinking social and environmental policies with Finland and Denmark joining Sweden and Norway in the top 15.
Asian and Middle Eastern countries appear to be economical sleeping giants in the list, with the United Arab Emirates ranked top for up-and-coming economies and Thailand is considered the best country to start a business in.
Malaysia is seen as the best country to invest in.
Elsewhere, the list says that Panama is world's most business-friendly nation while Canada is the best place on the planet for quality of life and education.
The number-one destination for visiting is Brazil and the country with the richest tradition is Italy for the second successive year.
John Gerzema, chairman and CEO of Y&R's BAV Consulting, told US News: "Our data captured widespread global concern for the social and geopolitical changes that cast many nations into uncertainty and turmoil.
"The new rankings reflect people's desire to restore some sense of order by rewarding nations they perceive as championing neutrality, stability and diplomacy."
As well as ranking the nations in terms of their qualities, the survey also throws up interesting worldwide trends.
The recurring theme among those taking part in the survey was the election of Republican Donald Trump.
His competition - Democrat Hillary Clinton - won the popular vote in the US and would have done if it was a global election, judging by the responses.
But, in many countries, Trump would have walked the vote.
In Russia, 83 percent of the survey viewed him favourably as well as 54 per cent of the Chinese respondents.
He also polled well in Israel with 46 percent of respondents liking him, 42 per cent in Nigeria and 37 percent in Turkey.
The top issues facing the world, according to the report, is gender inequality, climate change and the war in Syria while only a small portion of the feedback mentioned the gap in people's incomes.
Given the contentious election of Donald Trump as President of the US, nearly two-thirds believed there was a leadership crisis in the world today.
Almost three-quarters said a new generation of leaders is needed across the globe.
Top countries
1. Switzerland
2. Canada
3. United Kingdom
4. Germany
5. Japan
6. Sweden
7. United States
8. Australia
9. France
10. Norway
11. Netherlands
12. Denmark
13. Finland
14. New Zealand
15. Singapore
16. Italy
17. Luxembourg
18. Austria
19. Spain
20. China
