- Moody’s reports potential indirect effects of U.S. import tariffs on Sub-Saharan African banks.
- Reduced growth in China could impact trade-finance fees and loan issuance by these banks.
- Chinese economic slowdown influences global commodity trade, affecting African exporters.
Moody’s warns that broader macroeconomic consequences, particularly slower growth in China, a key trading partner for African commodity exporters, could indirectly impact the region's banks
African banks face indirect risks as China slows amid U.S. tariffs — Moody’s
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A recent report by credit rating agency Moody’s reveals that while banks in Sub-Saharan Africa are unlikely to face direct impacts from U.S. import tariffs, they may still feel the strain through “second-round effects.”
Moody’s warns that broader macroeconomic consequences, particularly slower growth in China, a key trading partner for African commodity exporters, could indirectly impact the region's banks, Reuters reported.
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Moody also cited potential increases in funding costs as another risk stemming from the global ripple effects of the tariffs.
"China’s potential economic slowdown is an important second round risk: weaker demand could cut export volumes and prices, especially for commodities," Mik Kabeya, VP-Senior Analyst at Moody’s Ratings told Reuters.
When miners and oil companies export less or earn lower revenues per tonne, banks collect fewer trade-finance fees, potentially tightening their capacity to issue new loans.
Sluggish economic growth
China's economy is still stuck in low gear as it recorded one of its slowest economic growth rates in decades last year. The country’s official factory activity index dropped to 49.0 in April, its lowest level in 16 months, showing the impact of U.S. tariffs.
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In response, the International Monetary Fund revised its growth forecast for China downward to 4% for 2025 and 2026, warning that reduced Chinese demand could reverberate across commodity-exporting nations.
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Investor caution driven by trade tensions may also lead to wider dollar-bond spreads, increasing refinancing costs for African banks that rely on wholesale hard currency funding for more than 20% of their assets, according to analyst Aurelien Gabeya.
Meanwhile, growing financial distress across several African countries, combined with China’s economic headwinds, has led Beijing to scale back support for energy projects on the continent.
As a result, Chinese lending to Africa dropped to under $1 billion last year, the lowest level in more than two decades.
