Moody’s Investors Service Singapore Pte. Ltd recently announced that the shift in the US policies following post-elections may implicate credits for Asia Pacific (APAC) sovereigns due to changes in trade and investment if the next US administration adopts less proactive foreign engagement over time.
“Trade has been a key focus of the US election campaign. While we estimate that related policy measures would have a limited effect on the US credit profile, they could be material for other sovereigns,” Moody’s said.
The research house in its report stated that the credit implications are likely to be limited and an example is that APAC sovereigns’ direct exposure to a potential slowdown in US imports is generally limited. Asian economies whose exports to the US are focused on high value-added manufacturing products are more vulnerable to policies that can hinder the foreign sourcing of business services.
Moody’s further commented that over a longer period of time, a narrower climate in the US could crimp foreign direct investment flows, as expansion of production facilities refocus on domestic locations. However, the very small stock of US manufacturing foreign direct investment in APAC implies negligible exposure in this respect.
The report stated that the countries said to be the most vulnerable are Malaysia (A3 stable), Taiwan (Aa3 stable), and Korea (Aa2 stable) in its efforts to banish high-value-added manufacturing jobs. Similarly, India (Baa3 positive) and the Philippines (Baa2 stable) would be exposed to any policies that discourage US businesses from foreign sourcing of services.
Moody’s stated that US policy under the next administration could range from a continuation of the status quo to a gradual retrenchment from trade and investment ties and curbs on immigration.
Further details are available in Moody’s recently released report “Sovereigns — Asia Pacific: US Post-Election Shift in Trade Policy Would Affect High-Value Manufacturers Most”.