Economic Letter
Brief summaries of SF Fed economic research that explain in reader-friendly terms what our work means for the people we serve.
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How Much Are Banks Exposed to Trade Policy Changes?
Simon H. Kwan
Banks may be indirectly exposed to trade policy through lending and through the broader effects of trade on the economy. Analysis finds that exposure to recent trade shocks was concentrated in large banks, including the six largest U.S. banks with strong ties to the global financial system. The cost of insuring large banks against default jumped following the April 2025 U.S. tariff announcement, indicating that investors perceived a higher risk of failure. This implies that future trade shocks could raise the risk of financial stress as assessed by market participants.
