US dollar slide could pressure export-driven sectors and banks, S&P warns
News Summary
S&P Global Ratings warns that a depreciating US dollar could immediately impact export-focused sectors in many countries and banks with significant lending to them. Credit analyst Xavier Jean stated that the most immediately exposed sectors and geographies are those where a weaker US dollar could strain volumes and revenues or compress margins, especially if they are subject to US tariffs and lack a production footprint in the US. Financial institutions with meaningful corporate lending to export-oriented small to medium-sized enterprises (SMEs) could see pressure on their asset quality. This is particularly true for the banking systems of Thailand, Taiwan, and Cambodia. S&P cited recent data indicating that exports contribute nearly 60% of Thailand's GDP, with exports to the US accounting for about 20% of GDP. For Taiwan and Cambodia, highly dependent on goods and services exports, exports to the US represent approximately 20% and 40% of their total exports, respectively. A significant number of exporters in these regions are SMEs. Since President Donald Trump returned to office in January and imposed tariffs against US trading partners, the US dollar has fallen from its peak. The US dollar index has dropped 9.7% since its January 13 peak.
Background
Currently, the US dollar is experiencing sustained depreciation since President Donald Trump's return to office in January 2025 and his administration's imposition of tariffs against US trading partners. The US dollar index has fallen 9.7% since its peak on January 13. This macroeconomic trend poses challenges for global economies, especially those heavily reliant on exports, particularly to the United States. S&P Global Ratings has specifically highlighted that export-oriented economies in parts of Southeast and East Asia, such as Thailand, Taiwan, and Cambodia, along with their lending banks, face risks of deteriorating asset quality and profitability. The Trump administration's protectionist trade policies, including import tariffs, aim to bolster US domestic industries but often provoke retaliatory measures from trade partners and can exacerbate global currency volatility.
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