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A potential shift in policymaking following the election of a US president would have a modest impact on trade overall, says Moody's Investors Service in a report published today.
Moody's report, entitled "Sovereigns -- European Union: US Post-Election Shift in Trade Policy Would Have Modest Impact Overall," is available on www.moodys.com. Moody's subscribers can access this report via the link provided at the end of this press release. The rating agency's report is an update to the markets and does not constitute a rating action.
Campaign proposals ahead of the US presidential election point to a period of less proactive foreign engagement by the US over time, whichever candidate wins. Outcomes could range from a continuation of the status quo to a retrenchment from trade and investment ties, and curbs on immigration.
"While some countries could face a negative effect in terms of investment from the US, trade accounts for less than 5% of GDP for most EU countries, and remittances are negligible," says Dietmar Hornung, an Associate Managing Director at Moody's.
The EU's trade exposure, measured in goods exports to the US, is limited at 7.6% of total exports and 2.5% of the EU's nominal GDP.
Key EU exports to the US are machinery and transportation equipment, chemicals and related products, and manufactured goods. The EU's exposure to the US in the services sector is smaller overall (1.5% of GDP as of 2015) than it is in terms of goods exports.
Ireland (A3 positive) stands out as being the most significantly exposed, followed by Belgium (Aa3 stable), Germany (Aaa stable) and the Netherlands (Aaa stable).
Investment exposure is substantial in some cases. Luxembourg (Aaa stable), Ireland and, to a lesser extent, the Netherlands, the UK (Aa1 negative) and Cyprus (B1 stable), might potentially be negatively affected by a slowdown of US investment. In 2014, FDI from the US amounted to 716%, 124%, 85.5%, 20% and 9.3%, respectively.
Remittances are negligible. For most EU sovereigns, remittances from the US to the EU account for 0.5% of GDP or less.
