Exporters are most directly exposed to US tariff changes, but most debt issuers face indirect effects

PTI New Delhi

Moody's Ratings on Tuesday said the uncertainties  around US tariffs have negative credit consequences for debt issuers across emerging markets, including companies, governments and banks.

"The on-again, off-again US tariffs and difficulty predicting US trade policy have negative credit consequences for debt issuers across emerging markets," Moody's said. Besides, geopolitics is an additional stress for emerging markets, including the flare-up of tensions between India and Pakistan.

Exporters are most directly exposed to US tariff changes, but most debt issuers face indirect effects, Moody's said, adding tariffs will reach a much bigger and varied group of debt issuers indirectly through slowing economic growth and, for many, commodity price declines, currency depreciation and investor risk aversion.

"The raft of tariffs the US administration has announced, altered and paused this year has negative credit consequences for debt issuers across emerging markets, including companies, governments and banks," Moody's said.

Companies that rely on exports to the US are most exposed. But the wider effects of tariffs and trade uncertainty on consumer, business and financial activity will affect most emerging market entities, even as tariff deals emerge, it added. In early April, the US administration announced and then paused for 90 days the implementation of sweeping, country-specific tariffs on trading partners.

It maintained a base 10 per cent tariff with exemptions for some sectors and higher tariffs imposed previously for other sectors including steel and aluminum. The US also raised tariffs to 145 per cent on imports of most goods from China, prompting China to raise tariffs on US goods to 125 per cent - both in addition to already existing tariffs.