US tariffs threaten to destabilise African banks amid global trade tensions, warns Moody's

MOODY’S Ratings has cautioned that though the US tariffs are expected to have few direct credit implications for African banks, the tariffs will have significant indirect negative implications through the financial markets’ risk-transmission channel.

- SIPHELELE DLUDLA

Earlier this month, the US government authorised a 90-day pause on the implementation of most new US tariffs, reverting to a universal rate of 10% on all almost all targeted countries, including African countries.

However, the Trump administration ramped up import tariffs on goods from China to 145% and the Chinese government retaliated with its own 125% tariffs on US imports, setting off a trade war between the world’s two largest economies.

Moody’s on Thursday said it expected the increase in tariffs after the 90-day pause is lifted to have few direct credit implications for African banks because the continent's trade with the US was slight, which will limit risk transmission.

Mik Kabeya, vice president and senior analyst at Moody’s Ratings, said while their overall outlook for the African banking sector was unchanged, the tariffs will engender a more challenging macroeconomic outlook and greater uncertainty around asset prices and interest rates.