US Trade Policy How Rising Tariffs Increase Global Credit Risks

By: Swarnalata

Published on: Apr 11, 2025

Key Takeaways

• Global & European economic risks remain negative due to trade tensions, financial instability, sovereign debt concerns, and geopolitical factors.


• New US tariffs are broader and more aggressive than expected, with 10% duties already in effect and potential 50% tariffs delayed for 90 days (excluding China).


• Trade deficits influence "reciprocal" tariffs, with the US targeting countries based on 2024 goods trade imbalances.

Why Rising US Tariffs Threaten Global Credit Stability

The global and European economies face growing risks, driven by four major challenges:

 Escalating Trade Tensions & De-Globalization

• The US has implemented 10% tariffs on most trading partners, with additional customized tariffs (up to 50%) delayed for 90 days (except for China).


• These measures are more extensive and rapid than in Trump’s first term, signaling a stronger push for trade protectionism.

Financial Market Volatility & Stability Risks

• Recent tariff announcements have contributed to market instability, prompting temporary delays in some duties.


• Investors are reassessing risks as trade wars disrupt supply chains and economic forecasts.

Sovereign Debt & Government Budget Pressures

• Higher tariffs could weaken export-dependent economies, increasing debt sustainability concerns.


• Countries with large US trade deficits (based on 2024 data) face targeted "reciprocal" tariffs, worsening fiscal strains.

Geopolitical Uncertainty

• The US-China trade conflict remains a key flashpoint, but 60+ other nations are also at risk of future tariff hikes.

What’s Next for Global Trade & Credit Markets?

The accelerated tariff rollout suggests prolonged economic friction, with potential ripple effects:

• Higher consumer prices and supply chain disruptions


• Increased sovereign credit risk for trade-dependent nations


• Market volatility as investors adjust to shifting trade policies

Countries with significant US trade deficits should prepare for further trade restrictions, while businesses must diversify supply chains to mitigate risks.