S&P Global Market Intelligence presents a roundup of articles around the potential impact of President Donald Trump's recently announced tariff policy on the US financial services industry.
US bank stocks have bounced back after facing pressure from tariff announcements.
The KBW Nasdaq Bank Index grew 0.9% year to date through May 12 after the US and China agreed to de-escalate tariffs on each other's goods for 90 days. US bank stocks also rose slightly after the Federal Reserve said May 7 that it would keep the federal funds rate in the target range of 4.25% to 4.5%.
The recovery came after the sector faced a sell-off in wake of President Trump's April 2 tariff announcement.
In April, banks recorded one of their worst weeks since 1990. In an S&P Global Market Intelligence analysis, 212 banks recorded a median total return of negative 3.2% for the month, underperforming the S&P 500's 0.7% decline.
Lower stock prices translated to lower valuations. The median price-to-adjusted tangible book value for the 212 banks was 126.1% as of April 30, down from 134.6% at March 31 and 140.3% at the end of 2024.
However, the banking sector benefited after the US said it would pause or scale back tariffs with most trading partners, helping trigger a run-up.
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Analysts believe that the tariff fallout impacted results in the Federal Reserve's most recent senior loan officer opinion survey on bank lending practices. Survey respondents reported tighter underwriting standards and weakened demand for commercial and industrial loans.
Transportation is among the lending segments likely to see significant impact from potential tariffs.
The industry has already faced headwinds over the past few years because of declining demand, rising costs and stagnant freight rates. These factors contributed to one bank's failure in late 2023. Now, the possibility of tariffs and a recession is threatening the transportation industry even more, US bank executives said on first-quarter earnings calls.
First Business Financial Services Inc. stopped lending to the transportation sector in the first quarter of 2023 and is letting its current portfolio run off. It has experienced some "isolated weakness" in recent quarters, contributing to an uptick in nonperforming assets and charge-offs, executives said on the company's year-end 2024 earnings call.
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Executives of several listed private equity firms also talked about potential economic impact of the tariffs on the first-quarter earnings calls, emphasizing the stability and relative insulation of their portfolio holdings, their long-term investment perspective and opportunities in market dislocation. Private equity giant Carlyle Group Inc., however, expects tariffs to impact some of its investments in the near-term with possibility for longer-term impacts.
Tariff-related discussions in the earnings calls of S&P 500 companies have surged since the US presidential election in November 2024, with tariffs joining inflation as one of the most widely mentioned topics, according to an analysis of S&P Global Market Intelligence data.
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Elevated expectations for a downturn have produced only a modest deterioration in analyst forecasts for credit card credit performance, echoing banks' guidance that while the economic outlook is profoundly uncertain, current household finances remain strong.
For a group of 15 large US banks, consensus forecasts for card net charge-off rates in 2026 rose by a median of 6 basis points from April 10, before first-quarter earnings season started, through April 25, according to data from Visible Alpha, a part of S&P Global Market Intelligence.
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The economic impacts of Trump's constantly changing tariff regime appear to be forcing the Federal Reserve into a policy corner. With the prospect of stagflation, Fed officials may soon need to choose between addressing the inflation expected with higher tariffs on goods from nearly all US trading partners and potentially rising unemployment as the domestic economy slows amidst the sudden shift in global trade.
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Given the timing of Fed meetings, government data releases and a 90-day pause on reciprocal tariffs expected to last until early July, the full impact of tariffs on inflation and jobs may not appear in data until the fall, indicating that clarity could still be months away.
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