African banks may soon feel indirect pressure from global trade tensions, as a slowdown in China, combined with the ripple effects of U.S. tariffs, threatens to weaken demand for the continent’s commodity exports, Moody’s has warned.

In a new report, the global credit rating agency said banks in Sub-Saharan Africa are unlikely to suffer direct fallout from the tariffs but face serious “second-round effects” tied to China’s broader macroeconomic struggles.

Reuters reported that Moody’s analysts flagged potential increases in funding costs and declining trade-finance income as key risks for African banks.

“China’s potential economic slowdown is an important second round risk: weaker demand could cut export volumes and prices, especially for commodities,” Mik Kabeya, VP-Senior Analyst at Moody’s Ratings, told Reuters.

When African miners and oil companies export less or earn lower revenues per tonne, banks collect fewer trade-finance fees, which could tighten their ability to extend new loans.

China’s economy, long a critical engine for global growth, has recorded some of its weakest expansion rates in decades.

In April, China’s official factory activity index dropped to 49.0, its lowest in 16 months, as the weight of U.S. tariffs and internal challenges took hold.

In response, the International Monetary Fund (IMF) recently revised China’s growth forecast downward to 4% for both 2025 and 2026, cautioning that reduced Chinese demand could send shockwaves through commodity-exporting nations.

Beyond trade flows, investor caution linked to global tensions may also widen dollar-bond spreads, raising refinancing costs for African banks.

Analyst Aurelien Gabeya noted that many African banks depend on wholesale hard currency funding for over 20% of their assets, making them particularly vulnerable to shifts in market sentiment.

Adding to the strain, Chinese lending to Africa, once a major source of financing for infrastructure and energy projects, has sharply declined.

Beijing’s pullback, driven by rising financial distress across several African countries and its own domestic headwinds, saw Chinese loans to Africa fall to under $1 billion last year, the lowest level in over 20 years.