How fluctuating international trade conditions are reshaping emerging markets credit risks
Shifting US policies and trade uncertainty are creating new challenges for emerging markets, disrupting businesses, governments, and financial systems alike. Companies that depend on exports to the US are feeling the immediate strain, but the ripple effects — slower economic growth, currency volatility, and shifting investor sentiment — are impacting nearly every sector.
Tariffs have direct and indirect effects on emerging markets. Companies exporting tariffed goods to the US face the most immediate risks. However, the broader impact extends to sectors across emerging markets, as tariffs contribute to slower economic growth, declining commodity prices, weaker currencies, and increased investor caution.
Chinese exports are the main focus of US tariffs. Many rated companies in China (A1 negative) are shielded from significant earnings impact due to diversified global operations and strong domestic revenue streams. Beyond China, auto and chemical companies in Latin America, South Asia, and Southeast Asia face notable risks, though some benefit from strategies that reduce their exposure.
Sovereigns are affected by trade shifts, commodity prices, and risk aversion. Asian countries with significant exports to the US and supply chain ties to China are the most affected, potentially slowing their post-COVID fiscal recovery. In the Americas, nations heavily reliant on US trade also face challenges.
Ports face the greatest risks among infrastructure sectors. A drop in global trade from tariffs could reduce port revenues. However, many emerging market ports with US exposure — located in Latin America, China, India (Baa3 stable), and Indonesia (Baa2 stable) — have strategies in place to limit impacts.
Banks are vulnerable to borrower risks and market volatility. Declining corporate and consumer confidence in a weaker economic environment could reduce demand for new loans and strain borrowers' ability to repay existing debt.
For businesses, governments, and investors navigating these changes, understanding the evolving risks is essential. How will these dynamics affect credit stability across regions and industries? What strategies can help mitigate exposure? Our latest research provides actionable insights to help you stay ahead in this uncertain environment.
Browse our latest insights on credit risk in the emerging markets:
Indian banks are well positioned to face potential trade turbulence
Rated banks’ latest financial results show that they have robust capital buffers on the back of sustained improvements in profitability. They also maintain ample loan-loss provisions.
Local and foreign carmakers vie for share of India's market despite slow electrification
Competition is intense in India’s auto market, where a growing working population with rising incomes will drive strong sales growth.
Oil and gas demand and investment pathways diverge in China and India
Despite India's faster demand growth through 2030, Chinese national oil companies will retain an advantage over Indian peers because of stronger operations and better business and financial profiles.
Inter-regional transmission capacity key as India’s renewable power grows
The expansion of solar power generation in the northern and western regions of India and the intermittent nature of the energy source will drive the need for greater transmission connectivity.
Growing demand will fuel capacity additions and M&A in India's cement sector
Rising housing needs and infrastructure spending will boost demand growth, while regional disparities in India will drive sector consolidation as larger firms acquire smaller, less profitable players.
India’s robust internal growth drivers anchor its economy amid tariffs and uncertainty
A large economy, minimal reliance on goods trade, and government efforts to boost consumption, manufacturing and infrastructure all position India well in the current global economic environment.
Emerging market exporters have direct US tariff exposure; indirect effects hit wider swath
Even as agreements surface, the effects of trade uncertainty on consumer, business and financial activity will affect most emerging market entities, particularly those that rely on exports.
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