Navigating global trade tensions has become increasingly crucial for stakeholders in Europe’s financial markets, especially amid recent tariff escalations initiated by the United States in early 2025. Our latest analysis explores the anticipated ripple effects of these trade developments on the economies of the United Kingdom and the Eurozone, highlighting significant concerns for specific sectors such as automotive, metals, and manufacturing.

Although the direct macroeconomic consequences are expected to be relatively moderate under baseline scenarios, substantial downside risks remain. Heightened uncertainty from these trade tensions poses notable threats to economic growth, potentially amplifying stress within corporate sectors heavily reliant on exports and trade-sensitive supply chains. Consequently, banks across Europe face the risk of deteriorating asset quality and rising non-performing loans (NPLs).

Our detailed report examines historical precedents like the Smoot-Hawley Tariff to underscore the severity of potential outcomes from escalated trade conflicts, including financial instability and increased NPL ratios. We also identify key factors for market participants to monitor closely, ranging from evolving trade policies and macroeconomic indicators to sector-specific health and banking stress test results.

By proactively addressing these risks and utilising forward-looking indicators, stakeholders can strategically prepare for an anticipated rise in NPL supply and navigate this complex environment more effectively.

Accuria provides regular forecasts of NPL ratios in many countries based on the most recent macroeconomic forecast scenarios. In this report, we provide our NPL ratio forecasts based on the recent IMF World Economic Outlook from April 2025.

For a deep dive into the analysis and strategic implications, read our full report here.