Fitch’s new rating chief is looking for answers on US policy under Trump.
By Mark Jones
LONDON (Reuters) – Fitch’s new head of sovereign ratings said the firm may have a clearer picture of how a second term in office of Donald Trump will affect U.S. credit ratings during next summer’s ratings review.
In his first interview since taking office last year, James Longdon said the downgrades of China and France would be a key focus along with Britain’s response to its fiscal strain.
Fitch downgraded the US in August 2023, the second major rating agency after Standard & Poor’s to give Washington a triple-A rating.
The current AA+ rating has a “stable outlook,” meaning a downgrade or upgrade is unlikely anytime soon.
But speculation that Trump will pursue an outrageous tax cut agenda and spark a global trade war is fueling much anger over the $36 trillion U.S. debt pile, which is growing by $2 trillion a year.
“I think you’re going to have some answers,” Longdon said, referring to America’s next rating review, which is due at the end of August.
“Of course you would have had the opportunity to see how the legislative process works,” he added on the tariff. “Is it going to be very gradual? Or is it going to be less gradual? I don’t know.”
Fitch currently considers “imported rates” — goods that are already subject to tariffs instead of all other goods — to be 60% in China, 25% in Mexico and Canada, and 10% for the rest of the world.
The country ratings put those numbers ahead, meaning that only something more extreme, such as imposing tariffs on all imports, would cause sweeping changes.
China is already on recession alert, which means it’s bound to get a lot of attention.
“We’ll see what comes out and what the response (to the tariffs) is,” Longdon said, “specifically a type of fiscal stimulus.”
There were positive signs of “a few green shoots in the property market” for China, although more information is needed on both tariffs and domestic issues.
France and Britain
France’s and Britain’s AA-ratings have also come under scrutiny due to issues at home.
France’s outlook was downgraded to “negative” in October, saying that its inability to control spending is rapidly pushing its debt to 118.5% of GDP.
Paris still has to set a budget for this year, but this week lowered its spending-cutting target from 40 billion to 32 billion euros ($32.94 billion) in a bid to win over opposition lawmakers.
