If applied, tariffs will represent the largest peacock trade shock for the global economy over 100 years. If continuous, this policy shift will have significant credit implications for both the United States (AAA by scope with negative credit outlook) and both sovereign globally.
Conversely, even their complete reversal, although unlikely, will not fully restore the trust of the previous alliance and supply chains, indicating a degree of sustainable economic loss.
Given such uncertainty, Scope has identified three scenarios to inform the upcoming updates of its development and fiscal forecasts as well as other credit-relevant factors: i) A ‘Tariff-Light’ landscape, ii) A full-scale trade war, and III) A economic and financial crisis.
US trading partners face many options in their tariff reactions
Development, inflation, public debt, external credit metrics and thus the final effect on sovereign credit ratings will eventually depend on the macroeconomic environment that emerges from the policies adopted by the US, reactions by business partners, and this trade before the shock, the innocent credit strengths and weaknesses of the countries before the shock.
Possible reactions between the US trading partners include to please the Trump administration through tariff dialogue, to adopt counterents, to attack free trade agreements and partially offset domestic economic reforms partially to the opposite effects of American tariffs.
The scope will evaluate both the adequacy and quality of regional and national monetary and fiscal policy reactions along with the scale of business shock, focus on the fiscal adjustment capacity and to absorb and absorb the impact of the shock for prolonged walking for long -lasting.
