Credit rating firm: Trump a risk to 'international economic conditions'

Credit rating firm: Trump a risk to 'international economic conditions'
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A top credit rating agency is warning that the Trump administration poses a risk to “international economic conditions.”

Fitch Ratings said Friday that early signs from the administration indicate that the stability of credit across the globe may be coming into question as the new president embarks on a dramatically different course from his recent predecessors, both in style and substance.

“US policy predictability has diminished, with established international communication channels and relationship norms being set aside and raising the prospect of sudden, unanticipated changes in US policies with potential global implications,” the rater said.

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The report focused primarily on how countries outside the U.S. could be affected by the new president. In particular, the rater warned that countries that have earned Trump’s scrutiny, such as China, Germany and Mexico, could face significant pressure on their credit, as the new White House has vowed to rework existing bilateral arrangements.

“A lot can change, but the aggressive tone of some Administration rhetoric does not portend an easy period of negotiation ahead, nor does it suggest there is much scope for compromise,” the rater said.

Countries that rely on funds sent to family by relatives living in the U.S. could feel a hit, as could countries that are part of global manufacturing chains as Trump pursues his “America First” policies.

Fitch noted that there are aspects of Trump’s proposals that could be good for the economy, such as renewed infrastructure investment and reduced regulations. But it shot down the idea that after a hectic first few weeks, the new administration will settle in and adopt a more traditional business-friendly tone.

“In Fitch's view, the present balance of risks points toward a less benign global outcome,” the rater said. “The Administration has abandoned the Trans-Pacific Partnership, confirmed a pending renegotiation of the North American Free Trade Agreement, rebuked US companies that invest abroad, while threatening financial penalties for companies that do so, and accused a number of countries of manipulating exchange rates to the US's disadvantage.”