India with a large domestic economy will be less affected by changes in growth and monetary policy in the new set-up under Donald Trump administration, S&P Global Ratings said on Wednesday. In a report on effect of Trump’s victory in the presidential elections on Asia-Pacific economies, S&P said many key US policies under the new administration remain undefined, leading to unusual uncertainty around the baseline outlook.
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“The effect of changes in the US growth and monetary policy on Asia’s trade and general financial market confidence, whether positive or negative, will be greater on smaller and more open economies of the region,” S&P Global Ratings’ Asia-Pacific Chief Economist Paul Gruenwald said.
“Countries with large domestic economies — China, Japan, India and Indonesia — will be less affected.” S&P said it will have to wait until Trump’s economic team is in place and its policy intentions become clearer before firming up its view on the effect and the associated risks on the Asia-Pacific.
US President-elect Trump will assume charge on January 20. “A Trump administration’s impact on the Asia-Pacific will likely appear in two main areas — one with a large downside and one with a moderate upside,” Gruenwald added.
S&P said the potential downside scenario for the Asia-Pacific is trade policy where Trump has advocated a punitive import tariff of 45 per cent on China based on his assessment of “currency manipulation”.
“Such an action will almost certainly generate a strong response from Chinese authorities and risks starting a trade and investment war between the world’s two largest economies, which is in no country’s interest,” Gruenwald said.
On the upside, S&P said Trump has argued for Keynesian-style infrastructure spending increases and tax cuts, which could boost US growth and demand for Asia’s exports, at least in the short run.