Fitch Warns Trump Administration Could Lead To Global Economic Disaster

Tyler Durden's picture

Twice in one week.

Just days after ECB president Mario Draghi (and other Europeans) suggested that Trump's proposed deregulation has "sown the seeds of the next financial crisis", when he told the European Parliament that "the last thing we need at this point in time is the relaxation of regulation. The idea of repeating the conditions that were in place before the crisis is something that is very worrisome", clearly ignoring that one of the biggest timebombs facing the world is his own balance sheet... 

... moments ago Trump was also preemptively cast as the scapegoat for the next global economic crash by none other than rating agency Fitch.

In a self-explanatory report titled "The Trump Administration Poses Risks to Global Sovereigns", Fitch is sounding the alarm on the potentially negative consequences of Trump's economic policies, even though none have been officially disclosed yet.

In the report Fitch warns that "the Trump Administration represents a risk to international economic conditions and global sovereign credit fundamentals" and cautions that because "US policy predictability has diminished, with established international communication channels and relationship norms being set aside", this raises the "prospect of sudden, unanticipated changes in US policies with potential global implications."

Before it unleashes its criticism, Fitch concedes that elements of President Trump's economic agenda "would be positive for growth, including the long-overdue boost to US infrastructure investment, the focus on reducing the regulatory burden and the possibility of tax cuts and reforms, assuming cuts don't lead to proportionate increases in the government deficit and debt. 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."

However, it then quickly shifts to laying out the negatives, which it believes are more likely to prevail:

The primary risks to sovereign credits include the possibility of disruptive changes to trade relations, diminished international capital flows, limits on migration that affect remittances and confrontational 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. Increases in the cost or reductions in the availability of external financing, particularly if accompanied by currency depreciation, could also affect ratings.

It then explains that base case is not favorable, noting that in Fitch's view, "the present balance of risks points toward a less benign global outcome."

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. The full impact of these initiatives will not be known for some time, and will depend on iterative exchanges among multiple parties and unforeseen additional developments. In short, 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 rating agency warns that sovereigns most at risk from adverse changes to their credit fundamentals "are 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"As a result, nations that could suffer include Canada, China, Germany, Japan and Mexico, which have been identified explicitly by the Administration as having trade arrangements or exchange rate policies that warrant attention, "but the list is unlikely to end there." Here Fitch takes a stab at Mexico saying that "our revision of the Outlook on Mexico's 'BBB+' sovereign rating to Negative in December partly reflected increased economic uncertainty and asset price volatility following the US election."

Fitch also cautions that as a result of proposed protectionist policies, "the integrative aspects of global supply chains, particularly in manufactured goods, means actions taken by the US that limit trade flows with one country will have cascading effects on others. Regional value chains are especially well developed in East Asia, focused on China, and Central Europe, focused on Germany. "

Curiously, Fitch also takes a detour into Trump's most controversial policy to date, his immigration executive order, and says that tighter immigration controls and possible deportations "could have meaningful effects on remittance flows, as the US has the world's largest immigrant population." Here Mexico would be most in danger as "Mexico share the world's top migration corridor and have the largest bilateral remittance flows." Relative to GDP, remittances are even larger for Honduras, El Salvador, Guatemala and Nicaragua, all of which receive most inflows from the US.

Finally, Fitch warns about the risk to retaliatory measures in the form of offshore direct investment in the US, and says that "countries hosting US direct investment at least part of which has financed export industries focused back on the US, are at risk of being singled out for punitive trade measures."

The list of these countries is potentially long, since US-based entities account for nearly one-quarter of the stock of global foreign direct investment. Countries with the highest stock of US investment in manufacturing are Canada, the UK, Netherlands, Mexico, Germany, China and Brazil.

In short, one wrong policy by the Trump administration, and the carefully constructed house of cards, built over decades of globalization, is in danger of collapse, resulting potentially in a global economic crisis.

And so, after two official warnings by some of the most established institutions, Trump has been officially put on notice that should anything bad happen to the world economy, it will be his fault, as all those who lit the burning fire, quietly wash their hands.

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LawsofPhysics's picture

All by design...

 

"...as all those who lit the burning fire, quietly wash their hands."  -- YES!  All those scumbags, like Hank "tanks in the Streets" Paulson want to be sure they are not prosecuted for the treasonthey committed. They will FAIL!

IridiumRebel's picture

Da finanshill kollapz is do to trump!

WTFRLY's picture

because Joo World Order is getting ready to turn over the table

 

AllTimeWhys's picture

Blame Trump, Blame Trump, Blame Trump...

 

change the fucking record already

O C Sure's picture

 

 

"...as all those who lit the burning fire, quietly wash their hands."

True no matter where you splice it

FreezeThese's picture

We know Fitch - TRYING TO STAY POSITIVE PRICK!!!!

greenskeeper carl's picture

Funny how doubling the national debt, and a federal reserve that printed trillions of dollars to bail out most of the planet is never mentioned, but trump may do it with a couple misguided trade ideas.

onewayticket2's picture

AMEN.   

Where the F has Fitch been?  The entire reason trump is in the WH is bc Washington has F'd it all up so badly....voters swung for the fences in a desperation move.

 

 

Manthong's picture

Somebody forgot to type “Bought and paid for” at the beginning of the headline.

The Saint's picture

Sounds like LIBERAL BIAS at work here.

 

Rabbi Chaim Cohen's picture

The pipeline to this coming disaster began long ago. Trump's presidency is a symptom of the collapse not the cause. 

onewayticket2's picture

I might not use the word "symptom" as much as "antidote"....there is a chance - a small one - now.  3 mos ago, it was all but over.

 

Antifaschistische's picture

ZH friends...

...I have a plethora of libtard colleagues, friends, and family members.   Many of which were closet snowflakes that I didn't know about until their recent meltdowns.

...when they initiate a cry fest and "trump is terrible" tirade, I use this opportunity to ask.."why does Trump have the power he has?  who gave it to him?  who gave the people in washington this much influence over your life?"

...if you don't like it, then let's work together to remove their ability to have this influence.  Don't just cry because "your gal" didn't make it to the oval office.  You should be crying because for the past 50 years we have handed washington so much control over our lives, our homes, our cities, our schools, our food, our air, our water, our etc.....

...however, I did cross the line last week when I told a few of them they all sounded like libertarians.   That "L" word is quite offensive.  :)

greenskeeper carl's picture

It is funny how they seem to care so much about individual and states rights all of a sudden. It is curious, now that they want government out of their lives, they HATE those of us who have been hammering this very point for years, regardless of who was in charge. They also have ZERO interest in finding common ground. There are plenty of things trump seems to want to do that I do not agree with, and no matter how much I agree with him on some things, I most emphatically do not want having the fedgov in charge of anymore aspects of my life. I think they hate us so much because they are finally seeing we were right about the consequences of giving so much power to the government, and that they may not like it when the other party is in charge. I've been saying for years that what Harry Reid did would come back to haunt them later, and none of them wanted to hear it.

eatthebanksters's picture

Oh no!  The sky is falling!!  Well, it could lead to worldwide economic disaster for Fitch...now that the Trump Administration has started to investigate those responsible for the 2008 Financial Crisis...starting with Deutsche Bank.  I wonder why Obozo never had the nuts to do this...

847328_3527's picture

Odd that Fitch is in a panic given Trump has created more jobs in one month then Soweto did in 8 years.

 

More jobs = more consumer spending

Fitch is only worried about Big Bankers' profits and could care less about middle class America, inner city crime, terrorism, etc.

3rdWorldTrillionaire's picture

Charles Seville's assessment of US credit has been innaccurate for years since the US implemented an explicit guarantee on GSE debt... By Fitch's own rating sensitivities, the US has breached its debt/GDP threshold for a AAA rating once you include the aforementioned guaranteed debt. But, now it's all Trump's fault... hacks <eye roll>

BennyBoy's picture

 

Fitch Ratings saw the housing bubble before  after it popped.

Countrybunkererd's picture

as if the death of the petrodollar hasn't been written for a while now.  Does anyone still make rope from hemp?  We need lots and lots and lots of it.

J S Bach's picture

We should all listen to the warnings of Establishment experts who have profited from the criminality of our existing system.  Personally, I'm shivering all over at the hubris and panache of Trump.  It's much better to keep things as they are so that our elite ruling class can continue their sumptuous feasting.

Nobody For President's picture

 Exactly Johann - Fitch the Bitch = just another MSM mouthpiece.

JRobby's picture

Fitch

Bitch

None of these idiots understand anything about economics, sentiment.

Namely, how much WE HATE THEM.

Giant Meteor's picture

Yeah, you gotta point there. But after awhile, when the same show is continually repeated, with new actors, and scenery, folks ought to catch on that its basically the same play, you know, with different actor and scene changes.

I mean let us ponder for a moment. If life, death  or whether or not fraudelent "markets" are wholly dependent upon one man, his words, deeds or actions, I would suggest, Houston, we have a problem here ... not to mention the fact I thought that this was the job ofthe FED/s The globe is ruled by madmen, the rules are made by sociopaths, sociopaths with keen killer instincts I might add.

The rest of the show, is either Shakespearean, or Greek tragedy, take your pick.

Raffie's picture

How could it LEAD to disaster?

We are already there staring down the barrel of a gun due to decades of road the powers that be picked and our leaders gladly took us down so they can line their pockets and pad their lifestyle.

NAV's picture

Trump is going to have to beat the nation-wreckers or he’s going to have trouble.

slyhill's picture

But on a positive note: ABS (auto-loan backed securities) are now AAA rated!

GUS100CORRINA's picture

Where was FITCH when these DESPOTS with REPROBATE MINDS were undermining the REPUBLIC with their KEYNESIAN TRASH POLICIES and THEORIES.

SO NOT IT WILL BE ALL TRUMP's FAULT ... REALLY? 

It is really looking like these people against TRUMP from the start will never change and we are in for a prolonged WAR of IDEAS centered around FREEDOM or TYRANNY. It was probably much worse in the 1700s.

Long live the republic ... may I never see its demise.

 

BigWillyStyle87's picture

Wow this is rich, a ratings agency is injecting it self into politics now too LoL

LawsofPhysics's picture

Yep.  What did they rate AIG or Lehman Brothers back in 2008?

execute these fuckers already!!!

Burnbright's picture

Have you not been paying attention? They've been political for as long as I can remember.

FreeShitter's picture

Its already a disaster, fitch.

SomethingSomethingDarkSide's picture

CAUTION: Glass of Milk precariously perched on table side may fall over and spill due to rambunctious activity. 

Fucking duhh, life ain't a China Shop.

Countrybunkererd's picture

i used that example (with water) when out with friends a few weeks back to describe what Trump has "inherited" to make the point that it is likely WAAAAYYYYYYY too late.  I also said, bump the interest rate another .25 and see what happens.  Good dinner, good conversation, good friends... you know things that matter in life.

SomethingSomethingDarkSide's picture

Sounds like a fun evening w/ no liberal monkey wrenches thrown! 

"Oh, so you supported HRC, are anti-war, capitalism is failing, and everyone is racist.. yes - just blame Trump, it will be far cheaper than your therapist's bill and going back for an MBA." 

Personally don't go dining out because everyone just gushes anti trump bs, even the reataurant staff.  Zero of my dollar bills for any of them.

Countrybunkererd's picture

depends where you live, my fellow ZHer, depends where you live.  I eat out very very little by design because who know what is called "food" these days but that is a completely different issue.  Support of like minded people/ entities is something i take very seriously these days.

roadhazard's picture

Too early to tell but if he ain't in the running no one is. If it happens soon he can blame Obama.

tmosley's picture

These assholes should be fucking elated that they now have a patsy to blame their long formented economic devastation on.

Countrybunkererd's picture

they are jumping for joy.  how dare the plebs go against our demands!!???!!!

Dg4884's picture

That ship already sailed.  Nice try to inject politics tho.  What a cuck.

stant's picture

No vault 7 articles on ZH? Hummmmm

EuroPox's picture

Kurt Sonnenfeld (ex FEMA who did not hand over the videos he took immediately after 9/11) is in Argentina fighting extradition to the US.  He has been described as "a South American version of Edward Snowden".  Has Wikileaks got his videos?

 http://www.voltairenet.org/article160636.html

Seed vault = life insurance

Underground gold - self explanatory

F119 jet engine = (F=WTC6) 9/11 (Sonnenfeld has video of empty vaults under WTC 6)

Airman welding picture is from: "Keeping Structures Strong"

"Surveillance of mailboxes" picture = NSA

FullHedge's picture

Pretty soon cancer patients will be blaming Trump as well.

Countrybunkererd's picture

my brother died of cancer a few years back, can i blame Don?  what a world of shit, total utter shit.

GlassHouse101's picture

4 steps :

1: Trump builds a wall
2: economy tanks (from no fault of the Donald)
3: Blame 'nationalism', and 'racist borders' as the reason for the crash.  
4: Answer: GLOBALISM! NO BORDERS! (SOCIALISM/TYRANY)! 

FreeNewEnergy's picture

Let me offer my own #4: Answer: global jihad, protests, civil disobedience, possible civil war (which may already have started, i.e., BLM, liberal whiners nd criers vs. white rural ass-kickers with many guns who won't take shit lying down)

south40_dreams's picture

We're already there you dumbass

shovelhead's picture

AHHHRRRGGGGG!!!!!!

TRUMP TWEETED!!!

SELL SELL SELL!!!

 

Hey, It could happen..