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Donald Trump's victory in US presidential election raises global uncertainties: Fitch

Donald Trump's victory in the US presidential election has created uncertainty for many other sovereigns as the reaction in financial and commodity markets could also affect countries outside the United States, Fitch Ratings said on Thursday.



New Delhi: Donald Trump's victory in the US presidential election has created uncertainty for many other sovereigns as the reaction in financial and commodity markets could also affect countries outside the United States, Fitch Ratings said on  Thursday.

The rating agency said shifts in US policy can have global ramifications given the country's role as the world's largest economy and its pre-eminent diplomatic and military power status.

"Clarity on how much of Trump's campaign rhetoric will translate into policy will take time to emerge, but his emphasis on greater protectionism and a more unilateral foreign policy highlight two potential sources of spillover," it said.

Republican nominee Trump won the US presidential election earlier this month, defeating Democrat candidate Hillary Clinton.

Fitch said the uncertainty over aspects of future US policy automatically creates uncertainty for many other sovereigns, in varying degrees.

The US election outcome highlights the growth of anti- establishment populism, which is also evident in Europe, it said.

"The Trump phenomenon may boost support for European political leaders and parties outside the traditional centre-left and centre-right. In response, mainstream parties may accelerate fiscal loosening or pull back from structural economic reform," Fitch said.

The reaction in financial and commodity markets could also affect sovereigns outside the US.

"Some commodity prices rose in anticipation of US fiscal stimulus. But higher US Treasury yields could push up funding costs for other sovereigns, while a stronger dollar may be negative for emerging markets with significant foreign currency debt burdens," it said.

Fitch said if the new administration pursued more aggressive tariff policies towards China, we would expect China to take counter measures, with adverse consequences for growth and inflation in both countries and potentially Remnibi depreciation and risk aversion in financial markets that would likely spill over into other emerging markets.

"However, a sharp increase in protectionism would be resisted by US corporate lobbyists and mainstream Republican legislators, and we think incremental measures, such as bringing trade cases, are more likely," it said. 

 

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