US tariffs and their impact on the banking sector

On April 2, 2025, US President Donald Trump announced comprehensive import tariffs. These provide for a general tariff of 10% on all imports and specific tariffs of 20% on goods from the European Union. Although the latter have now been largely suspended for a period of 90 days, planning certainty for companies and financial institutions remains severely restricted.

The announcement caused considerable unrest on the global financial markets. At times, the S&P 500 recorded a loss of around USD 5 trillion in market value. However, some of these losses were recovered following the announcement of the temporary suspension of tariffs.

In view of these developments, economists are increasingly warning of an impending recession. Goldman Sachs has increased the probability of an economic downturn in the US to 45% and is forecasting growth of less than 1% for the current year.

Effects on the banking sector

The current situation poses difficulties for the banking sector - particularly because the US government's long-term strategy is still unclear. Despite the temporary suspension of tariffs, it is not possible to predict how the economic and trade policy environment will develop in the coming weeks and months.

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Challenges:

Volatility on the capital markets and rising market risks: The announced punitive tariffs have led to noticeable uncertainty on the financial markets. The result: strong price fluctuations and increasing market risks, which are a burden on banks' risk management and could lead to potential valuation losses.
Interest rate reaction: Fluctuating interest rates are to be expected due to the economic uncertainties. Monetary policy reactions by central banks to inflation trends and economic downturns are also conceivable.
Declining demand for credit: Economic uncertainty and a declining willingness to invest are noticeably slowing down lending - particularly in the corporate client business.
Increasing credit risk: The risk of loan defaults is growing, particularly for export-oriented companies and in the commercial real estate financing segment.
Setback in the securities and stock exchange business: A sustained decline on the stock exchanges could have a severe impact on the trading business - with particularly negative consequences for neobrokers and smaller banks.
Technological dependencies: The close integration with US technology providers harbors geopolitical risks - particularly with regard to IT infrastructures and data security.

Chancen:

Demand for hedging instruments: Companies affected by tariffs are increasingly looking for ways to hedge against currency and price risks. In this environment, banks can generate additional income through the targeted sale of derivatives and other hedging products.
Deregulation measures: The Trump administration is planning a comprehensive relaxation of financial market regulation, for example by reducing capital requirements and supervisory duties. Although this opens up new scope for banks, it also poses challenges for highly regulated business models.
Mergers and acquisitions (M&A): A relaxation of regulatory requirements could pave the way for larger mergers in the banking sector. This could result in economies of scale and strengthened market positions.
Crypto and FinTech integration: The planned creation of a clear regulatory framework for cryptocurrencies and FinTechs opens up opportunities for banks to position themselves in these dynamic markets and develop innovative offerings.

What companies can do now

In such a volatile environment, decisive action and strategic preparation are required. Companies should:

Plan scenarios: develop concrete response plans for interest rate, economic and stock market shocks and adjust them regularly.
Examine credit portfolios: Activate early warning systems for sectors at risk and foreign markets with increased customs exposure.
Assess technological risks: identify dependencies in cloud and software architectures and examine alternatives.
Strengthen on-premise solutions: develop strategies for local data processing - with a focus on resilience and reliability rather than purely on efficiency.

How KPMG can support

KPMG supports companies in adapting to the new framework conditions:

Analysis & evaluation: conducting sound risk analyses, for example on credit portfolios, foreign commitments and technological dependencies.
Reshoring & nearshoring: Strategic advice on the reorganization of global operating models - from reshoring to regional adaptation strategies (nearshoring)

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