trade uncertainty — The trade uncertainty has prompted euro area banks to tighten lending practices, as reported by the European Central Bank (ECB). In 2025, these changes were largely driven by escalating trade tensions, particularly affecting exports to the United States. The ECB’s analysis, detailed in a blog post authored by economists Anastasia Allayioti, Alessandro Ferrari, Petra Köhler-Ulbrich, and Matías Lamas Rodríguez, highlights the growing risks businesses face in this climate.
The ECB’s report examined data from corporate loans alongside responses from bank surveys, revealing that banks have become increasingly cautious in extending credit. This shift in practices was especially pronounced among lenders with significant exposure to companies impacted by trade risks.
As trade policies evolved, particularly with the introduction of broad-based tariffs in 2025, firms engaged in international trade encountered heightened uncertainty. This environment has led to concerns over weaker demand, supply chain disruptions, and pressure on profit margins, compelling banks to reassess their lending strategies.
Trade uncertainty: Impact of Trade Policies on Lending
The analysis specifically focused on banks’ exposure to trade with the United States, assessing how dependent their corporate borrowers were on exports to and imports from the country. The findings indicated that euro area banks generally faced greater exposure to risks from companies exporting to the United States compared to those importing US goods and services.
This export-related exposure varied significantly among banks, with many facing moderate risks while a smaller number had considerably higher exposure within their loan portfolios. Conversely, risks tied to imports were more limited and primarily concentrated among banks with lower levels of exposure, suggesting fewer lenders faced substantial vulnerabilities from US imports.
Shifts in Lending Standards
About half of the banks participating in the euro area bank lending survey (BLS) noted that trade risks were significant in 2025 and anticipated similar levels of exposure into 2026. The ECB observed that banks with the highest exposure to exporters to the United States were the ones most inclined to reduce loan supply, particularly from April 2025 onwards as trade disputes and tariff threats escalated.
The most significant impact on lending conditions was recorded between April and October 2025, a period marked by heightened trade tensions. However, some relief was noted later in the year as sentiment improved following a preliminary US-EU trade agreement reached during the summer, which helped ease concerns about future policies.
Monitoring and Adjustments
In light of these developments, banks adopted varying approaches. Some chose to closely monitor the situation without altering their lending standards, while others implemented stricter conditions, particularly for sectors heavily exposed to international trade risks. Industries such as car manufacturing faced additional challenges due to the tightening of credit, compounding existing structural issues.
A net 11 per cent of banks reported stricter credit standards in 2025 due to shifts in global trade policies and related uncertainty. This tightening trend is expected to persist into 2026. Furthermore, trade tensions have also resulted in reduced demand for loans, with a net 6 per cent of banks reporting weaker loan demand in 2025, and a net 3 per cent forecasting this decline to continue into the following year.
Adjusting to Economic Policy Uncertainty
The ECB explained that economic policy uncertainty has weakened credit conditions, with recent trade tensions compounding the issue. The dual effect of diminished loan demand and the tightening of lending practices by banks exposed to export risks has created a complex landscape for businesses seeking credit.
Despite these challenges, euro area lenders have maintained strong balance sheets overall. The ECB indicated that banks continue to adjust their strategic planning, adopting more cautious lending practices in response to the evolving trade-related risks.
