Trump administration poses risk to global government debt — Fitch

The Trump administration’s controversial immigration and trade policies may overshadow its pro-business fiscal stance, posing a threat to global government debt, Fitch Ratings has warned.

Donald Trump has sparked consternation both at home and abroad with his sharp rhetoric and blitz to make good on campaign promises less than a month after assuming the presidency.

The former property developer has already pulled the US out of the Pacific trade agreement, criticised judges and publicly feuded with Mexico’s president — moves that have sparked deep concern in foreign policy circles while also galvanising his base.

“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,” Fitch said in a report on Friday.

The ratings company said a less stable US could cause a slew of issues, including “disruptive changes to trade relations” and “exchanges between policymakers that contribute to heightened or prolonged currency and other financial market volatility”.

“The materialisation of these risks would provide an unfavourable backdrop for economic growth, putting pressure on public finances that may have rating implications for some sovereigns,” Fitch added.

Fitch said Mr Trump’s economic agenda, including the “the long-overdue boost to US infrastructure investment” would be “positive for growth”, but questioned whether other policies would overshadow the boost.

“One interpretation of current events is that, after an early flurry of disruptive change to establish a fundamental reorientation of policy direction and intent, the administration will settle in, embracing a consistent business- and trade-friendly framework that leverages these aspects of its economic programme, with favourable international spill-overs,” the company said.

“In Fitch’s view, the present balance of risks points toward a less benign global outcome”.

The sovereigns most at risk would be those with “close economic and financial ties with the US that come under scrutiny due to either existing financial imbalances or perceptions of unfair frameworks or practices that govern their bilateral relations”, Fitch said.

Among the countries that Fitch pointed to were Canada, China, Germany, Japan and Mexico, but “the list is unlikely to end there”.