Trump’s tariffs have shaken up global businesses in more than 90 countries. Stock markets have overwhelmingly dipped (although recovered in the main), investors are nervous and consumers are dragging their heels.
Although we haven’t seen any direct implications on banks’ results yet, pressures remain. As such, financial services are focusing their efforts on adjusting their strategy to not only support the day-to-day operations of clients but also to efficiently
address ongoing and future tariff developments. This means that the need for artificial intelligence (AI) and automation to make such plans a reality has never been greater.
The impact of tariffs
Globally, tariffs are undermining business and consumer confidence. Borrowing costs are climbing in the bond markets, returns are falling and banks are tightening lending standards. For companies, it’s harder to access credit at an affordable price and for
households, pensions and long-term savings are under strain.
Although the fallout has been less severe in the banking sector, financial services have still been impacted by knock-on effects of stagnant economic growth and drag on demand for services. In Europe for example, the potential economic slowdown creates a
difficult cycle where banks struggle to find new business, and borrowers find it difficult to repay their debts, which ultimately impacts the financial stability and earnings of the sector. Not only that but some regions may also see their net interest margins
(NIM) minimised due to the high proportion of variable-rate mortgages. And for commercial clients, the real impacts are on changes to trade patterns and resultant fund flows between regions. Adjusting to this to smooth out trade patterns is critical.
As the marketplace continues to shift and the future of tariffs remains uncertain, financial services are starting to rely more on AI and automation to help mitigate some of the challenges and secure resiliency and adaptability for the future.
Alleviating tariff pressures
AI and automation tools are well positioned to help banks and other financial services manage the ripple effects of trade tensions. For a long time, AI and automation has been used to, for instance, mitigate equity market volatility by enabling portfolio
managers to process vast amounts of market data, rebalance portfolios, and model long-term asset allocation shifts. In commercial banking, AI and automation can support real-time monitoring of margin calls, collateral and pricing adjustments, cash requirements
in different markets and stress test simulations under tariff-driven market impacts.
AI’s predictive capabilities can also help with real-time trade finance management as well as mitigate risks in terms of currency, cashflow and debt. Automated AI agents can be set up to monitor trade tariffs and regulations changes, suggest or enact changes
to policy and processes, which allows financial institutions to proactively address challenges surrounding tariff changes rather than just reacting to them. They can be set to make decisions, for example, with funding in different countries, or setting limits
on exposure by industry to then alert and include a human in the loop to confirm an action or prompt a direct client outreach. It’s less about generative AI – although that has its place in reviewing or summarising internal policies and processes or document
and data interrogation – and more about how best to combine AI and automation into a bank standard process. There will always be processes and procedures, policies and escalation paths. The true impact of automation and AI is when it can be embedded into these
workflows and processes to get the best outcomes for clients and the bank.
In only a few months, US tariffs have triggered increased market volatility and uncertainty, with rapid fluctuations in equity markets, trade finance flows and investor sentiment. AI, automation and GenAI offer practical tools to alleviate tariff impacts
on clients as well as, helping financial services to reduce risk, increase efficiency and respond quicker to an increasingly changing global trade setting.
