Lenders in Asia Pacific may seek safe havens on geopolitical, tariff woes

Automakers and part suppliers are feeling the most heat from the tariffs.

Lenders in Asia Pacific may opt to take their money out of emerging markets in the region on mounting geopolitical tensions, warned S&P Global Ratings.

“Lenders could turn risk-off and seek safe havens, causing capital outflows from emerging markets— compounding volatility in capital markets and currencies. We see geopolitical risk as high and worsening for Asia-Pacific and globally,” the ratings agency warned in its June 2025 report, "Credit Conditions Asia-Pacific Q3 2025: An Unsettling Environment."

Outcomes and uncertainty related to tariff negotiations poses another key risk.

"Higher export costs will eat into margins, and weaker sentiment will limit spending by businesses and households. This will drag on growth prospects," said Eunice Tan, head of Asia-Pacific credit ratings research at S&P Global Ratings.

Automakers and part suppliers are feeling the most heat from the tariffs.

Tariff differentials in the region could prompt Chinese producers to further reshore production to areas with lower tariff levels. This could exacerbate price deflation and displace local producers elsewhere in the region, weighing on growth and employment.

In China, manufacturers face weaker demand amid dampened trade and investment, leading to lower revenues and margins, and price suppression, S&P said.

The hit to small to midsized enterprises will be harder. Meanwhile, the recovery in the property sector is soft, it added.