Fitch Warns Rising US Tariffs Threaten APAC Bank Stability

Fitch Ratings warns that a substantial increase in US tariffs could destabilize the previously stable outlooks for banking systems in several Asia-Pacific (APAC) countries, notably South Korea, Taiwan, and Thailand, due to their high export exposure and vulnerability to trade disruptions. If the US implements further tariff hikes beyond the current 10% rate, or if economic impacts are more severe than anticipated, Fitch may downgrade its outlooks for these banking sectors from Neutral to Deteriorating. Higher tariffs are expected to weaken banks’ profitability, asset quality, and net interest margins in these markets. For China and Hong Kong, already facing Deteriorating outlooks, increased tariffs would likely intensify existing pressures, including rising non-performing loans in Hong Kong and ongoing profitability challenges in China. Vietnam's outlook could also worsen from Improving to Neutral if trade war fallout is more severe than expected. Moody’s Ratings adds that unpredictable US trade policy and tariffs will weaken global credit conditions, heighten default risks for low-rated corporates, and may slow global economic growth with increased recession risks.