Tariff war raises risk outlook for some regional banks

Profitability and asset quality could weaken if reciprocal tariffs go ahead. By Fitch Ratings

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Fitch Ratings previously anticipated broadly stable operating conditions across most Asia-Pacific banking systems in 2025, but a surge in US tariffs could threaten this assumption in some markets.

The effect of the trade war on specific banking systems in the region will depend on final tariff outcomes, their impact on local economic growth, banks' exposure to vulnerable sectors, and the potential for changes in fiscal, monetary or credit policy.

Our current neutral outlooks for the South Korean, Taiwanese and Thai banking sectors in 2025 could move to deteriorating if there are substantial further increases in US tariffs beyond the 10% rate imposed on all US trade partners on April 2, or if the hit to their economic growth is more severe than we expected.

This could occur if the US moves ahead with the higher country-specific reciprocal tariffs that are currently paused, or because of higher tariffs on sectors such as electronics (including semiconductors).