Moody’s Ratings has issued a stark warning that newly imposed US tariffs are set to weaken global credit conditions and significantly increase the risk of defaults, particularly for low-rated and speculative-grade companies. In a report released Wednesday, the agency highlighted how abrupt and unpredictable shifts in US trade policy are fueling market volatility and threatening to push the global economy toward recession.

"Non-financial corporate sectors are especially vulnerable, with speculative-grade firms at greater risk due to their dependence on debt markets,” Moody’s said, noting the knock-on effects of tariffs across credit markets.

Earlier this month, the US administration imposed sweeping changes to its tariff regime. On April 9, it implemented a 90-day pause on reciprocal tariffs, replacing them with a 10% flat rate on most countries. Just days later, on April 16, the US hiked tariffs on a broad range of Chinese goods to a staggering 245%.

Moody’s warned that the uncertainty surrounding tariff policies—even with the temporary pause—will impede long-term investment decisions, slow business planning, and drag down consumer confidence. “Our baseline scenario now projects a higher rate of corporate defaults as businesses face increased costs, tighter credit availability, and persistent economic uncertainty,” the agency said.

The tariffs are expected to reduce US GDP by at least one percentage point and drive up costs for American consumers and businesses. Over time, the burden of these tariffs will likely fall on consumers through reduced purchasing power and on businesses through shrinking profit margins.

In China, the escalating trade tensions are worsening the export sector’s struggles, with Moody’s forecasting growth could fall to 4% or lower this year. The agency noted that weak domestic demand may prevent Beijing from fully offsetting the economic shock, posing further challenges to recovery.

Moody’s Ratings has issued a stark warning that newly imposed US tariffs are set to weaken global credit conditions and significantly increase the risk of defaults, particularly for low-rated and speculative-grade companies. In a report released Wednesday, the agency highlighted how abrupt and unpredictable shifts in US trade policy are fueling market volatility and threatening to push the global economy toward recession.

"Non-financial corporate sectors are especially vulnerable, with speculative-grade firms at greater risk due to their dependence on debt markets,” Moody’s said, noting the knock-on effects of tariffs across credit markets.

Earlier this month, the US administration imposed sweeping changes to its tariff regime. On April 9, it implemented a 90-day pause on reciprocal tariffs, replacing them with a 10% flat rate on most countries. Just days later, on April 16, the US hiked tariffs on a broad range of Chinese goods to a staggering 245%.

Moody’s warned that the uncertainty surrounding tariff policies—even with the temporary pause—will impede long-term investment decisions, slow business planning, and drag down consumer confidence. “Our baseline scenario now projects a higher rate of corporate defaults as businesses face increased costs, tighter credit availability, and persistent economic uncertainty,” the agency said.

The tariffs are expected to reduce US GDP by at least one percentage point and drive up costs for American consumers and businesses. Over time, the burden of these tariffs will likely fall on consumers through reduced purchasing power and on businesses through shrinking profit margins.

In China, the escalating trade tensions are worsening the export sector’s struggles, with Moody’s forecasting growth could fall to 4% or lower this year. The agency noted that weak domestic demand may prevent Beijing from fully offsetting the economic shock, posing further challenges to recovery.