Fitch Ratings Chief Eyes Trump’s Impact on US Credit Score
As the world waits with bated breath to see how Donald Trump’s second term as president will affect the US credit rating, Fitch’s new head of sovereign ratings, James Longsdon, is preparing to make some crucial assessments. In his first interview since taking the helm, Longsdon revealed that China and France’s precarious ratings will also be under the microscope, alongside Britain’s response to its fiscal strains.
A Summer of Reckoning for the US
Fitch downgraded the US to AA+ in August 2023, citing concerns over the country’s growing debt pile, which is expanding at a rate of $2 trillion per year. While the current outlook is stable, Longsdon believes that Trump’s aggressive tax-cutting agenda and potential global trade war could have far-reaching consequences. By the time of the next rating review in the summer, Longsdon expects to have a clearer picture of the president’s plans and their impact on the US credit score.
Tariffs and Trade Wars
Fitch currently assumes that tariffs on goods will increase to 60% on China, 25% on Mexico and Canada, and 10% for the rest of the world. However, Longsdon acknowledges that only a more extreme move, such as imposing tariffs on all imports, would trigger sweeping changes to countries’ ratings. China, already on a downgrade warning, will be closely watched, particularly in terms of its response to tariffs and domestic fiscal stimulus.
France and Britain in the Spotlight
France’s AA- rating is under pressure due to its inability to rein in spending, which is pushing its debt towards 118.5% of GDP. Longsdon is waiting to see how the country’s budget plans unfold, with a decision on its rating potentially hinging on the outcome. Britain, meanwhile, carries a stable outlook, but Fitch is keeping a close eye on its public finance targets, which are increasingly at risk of being missed.
A Reputation for Being First
Longsdon is determined to maintain Fitch’s reputation for being a first mover among the “big three” rating agencies. With a keen eye on the global economy, he is poised to make some bold calls in the coming months. As he puts it, “If you’re going to make a call that ends up being right, you want to be the first.”
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