Credit rating agency Moody’s has stated that while banks in sub-Saharan Africa will likely not face direct repercussions from U.S. import tariffs, they could still be affected by “second round effects,” particularly the tariffs’ impact on the macroeconomic outlook and China’s economy.
Moody’s, in a recent report on African banks, highlighted that potential consequences include increased funding costs and negative effects stemming from slower growth in China, a significant export market for Sub-Saharan African commodity exporters.
Mik Kabeya, VP-Senior Analyst at Moody’s Ratings, told Reuters on Thursday that “China’s potential economic slowdown is an important second round risk: weaker demand could cut export volumes and prices, especially for commodities.”
This reduction in trade activity and earnings for mining and oil companies could lead to lower trade-finance fees for banks and potentially constrain new lending.
China’s official factory activity index saw a decline to 49.0 in April, its lowest point in 16 months, underscoring the impact of U.S. tariffs. The International Monetary Fund has also lowered its China growth forecast to 4% for both 2025 and 2026, cautioning that weaker demand in China would have ripple effects on commodity-exporting nations.
Furthermore, Kabeya noted that increased investor risk aversion due to tariffs could widen dollar-bond spreads. This would raise refinancing costs for African banks that fund over 20% of their assets using wholesale hard currency.