Banks don’t pay tariffs, but tariffs will cost them

Subscribe to enjoy similar stories. Bankers don’t import or export sneakers or cars. But that doesn’t mean they are immune to tariffs.

In fact, American lenders face a potential triple-whammy from the new trade regime announced by President Trump on Wednesday. The big threat is that a trade war leads to recession, or absent that, far slower economic growth. Bank revenues will tumble as customers, both consumers and companies, dial back on borrowing.

They could also find it tougher to pay back their debts. Meanwhile, a moribund economy could put downward pressure on long-term interest rates, even as inflation proves persistent and keeps short-term rates high. This would further squeeze bank profits.

Amid all this uncertainty, dealmaking is likely to slow, and corporate investment could tumble, eating into Wall Street fees. No wonder the new tariff announcements torpedoed shares of big U.S. lenders.

On Thursday, the KBW Nasdaq Bank index had its worst one-day drop, nearly 10%, since March 2023, in the aftermath of the collapse of Silicon Valley Bank. Big banks have erased all of their gains since the November election, when they rallied on hopes for a rebound in dealmaking and business activity. The threats will be a hot topic for investors later next week when JPMorgan Chase, Wells Fargo and Morgan Stanley report first-quarter earnings.

U.S. banks “aren’t in the direct line of fire for tariffs, but they make their living lending and doing business with all the companies that are in the line of fire," says Truist Securities bank analyst John McDonald. “The second-order impacts on consumers are critical for banks as well." Big U.S.