OREANDA-NEWS. The outcome of the United Kingdom's referendum on European Union (EU) membership will spill over to the U. S. economy but will not impact U. S. creditworthiness, says Fitch Ratings. The main impact will likely be felt through a renewed strengthening in the dollar, which will have a dampening effect on growth and could delay the Fed's next rate hike. A spike in market volatility and risk aversion could lead to a tightening of credit conditions. Credit spreads widened in reaction to the Brexit vote.

As a sovereign borrower, the U. S. benefits from global risk aversion. Falling yields on U. S. Treasuries underline the U. S. role as a safe haven, a key support to U. S. creditworthiness. Together with a historically low interest/revenue ratio of less than 8%, this allows the U. S. to sustain a general government debt burden higher than other 'AAA' sovereigns, at over 100% of GDP.

A shock to global trade poses less of a risk to the U. S. than other industrialized countries, although trade openness (the share of output accounted for by trade) is growing. Goods and services exports to the UK market account for 5.5% of U. S. exports. A UK downturn in isolation would have a meaningful but not large impact on U. S. exporters and little impact on growth.

UK subsidiaries account for one-quarter of the total stock of foreign investments held by U. S. multinationals, and sterling-denominated assets will be written down in line with the decline against the USD. However, UK investments form a much lower share of total net income from foreign investments than the stock of assets - less than Ireland, for example.

Total exports to the EU are four times the size of exports to the UK, and three times the stock of U. S. multinationals' investment in the UK. A severe knock-on impact to the European economy - not our base case - would have bigger implications for our U. S. growth forecasts.

The Brexit shock represents a blow to global stability from an unexpected quarter. Brexit may boost Eurosceptic and populist trends elsewhere in the EU and reduce the likelihood of the TTIP trade treaty coming into force. U. S. firms may reprice political risk in the EU and UK and delay investments. Uncertainty about the shape of relations between the UK and EU will dampen investor confidence. The EU response to Brexit may cause discord in the bloc and distract attention from other pressing problems.