Trade Tariffs Will Weigh on European Structured Finance

This commentary explores the impact of the tariffs announced by the U.S. Trump administration on the European securitisation market.

Key highlights include:
-- If tariffs lead to massive disruptions across industries, most European structured finance sectors will be negatively affected to some degree.
-- The impact will vary across countries as well as businesses, depending on the trade-dependencies of different European economies and businesses.
-- The European structured finance credit rating outlook remains mostly stable, however, because of good performance to date and the protection provided by amortising and deleveraging of securitisation structures, especially for senior bonds.

"If the effects of tariffs intensify and/or persist for a longer period or countries implement their own reciprocal tariffs, the lagged effect of these changes will undoubtedly result in slower economic activity, corporate stress, and increased defaults, which could affect the overall credit market", said Mudasar Chaudhry, Senior Vice President, Lead, European Structured Finance Research at Morningstar DBRS.