On February 4, 2025, the Trump administration imposed a 25% tariff on most imports from Canada and Mexico, its partners in the North American Free Trade Agreement (NAFTA). The administration also implemented new tariffs on China on that date. However, this was only the beginning of the tariff wars.
Black Swan Event on April 2nd On April 2, 2025, the White House issued an executive order that imposed significant tariff measures on 57 additional countries (President Donald J. Trump Declares National Emergency to Increase Our Competitive Edge, Protect Our Sovereignty, and Strengthen Our National and Economic Security). In response, countries began to retaliate and impose tariffs on the import of US goods into their countries. Since then, stock markets declined globally, and the bond market became jittery as well.
The 90-Day Pause on April 9th On April 9, 2025, the White House issued an executive order Modifying Reciprocal Tariff Rates to Reflect Trading Partner Retaliation and Alignment that paused some of the tariffs for 90 days and continued tariffs on China. While stock markets improved in response, significant uncertainty remains, and trade battles are continuing.
Why It Matters While the tariffs apply only to manufactured goods, it would be naïve to assume that the impact wouldn’t be felt across the economy, including financial services. Celent is assessing the potential impacts of tariffs by the US and other countries on its customers, whether they be financial institutions, software vendors, insurance providers, or IT services vendors. Here we examine the potential impacts on retail banking, both in the US and globally, and address these questions:
- What are the possible economic impacts that will affect consumers and financial institutions?
- Will consumers spend and borrow less if prices of tariffed goods increase?
- Will financial institutions spend less on technology, operations, and staffing if their costs
- increase, and will they pass cost increases on to their customers?
- Will consumers borrow less from financial institutions if inflation and interest rates stop
- declining, or resume increasing?
- How can financial institutions and their technology partners navigate the uncertainty?
