Moody’s warns of indirect risks to African banks from U.S.-China trade tensions

A recent report by credit rating agency Moody’s has warned that banks in Sub-Saharan Africa could face indirect risks from U.S. import tariffs, mainly through macroeconomic disruptions stemming from a slowdown in China, a key trading partner for African commodity exporters.

Moody’s noted that weaker economic growth in China posed a significant “second-round” risk to African banks.

Reduced Chinese demand could lead to lower export volumes and declining commodity prices, squeezing revenues for miners and oil producers across the region.

This, in turn, would reduce banks’ trade-finance fees and constrain their lending capacity.

“China’s potential economic slowdown is an important second-round risk: weaker demand could cut export volumes and prices, especially for commodities,” said Mik Kabeya, VP-Senior Analyst at Moody’s Ratings, in comments published by Business Insider.

China’s economy has remained sluggish, recording one of its weakest growth rates in decades last year. In April, the official factory activity index fell to 49.0—its lowest level in 16 months—reflecting growing pressure from U.S. tariffs and broader economic challenges.

In response, the International Monetary Fund (IMF) has revised China’s growth forecasts down to 4 percent for both 2025 and 2026, warning that a prolonged slowdown could ripple across commodity-dependent economies.

Moody’s also flagged the risk of rising funding costs for African banks. Analyst Aurelien Gabeya said that increased investor caution, driven by trade tensions, could widen dollar-bond spreads and raise refinancing costs.

Many African banks rely on wholesale hard currency funding for over 20 percent of their assets.

Compounding the situation, financial distress in several African countries and China’s own economic headwinds have led Beijing to reduce its financial engagement on the continent.

Chinese lending to Africa dropped to under US$1 billion in 2024—its lowest level in more than two decades.

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