Moody's Ratings on Tuesday said the uncertainties around US tariffs have negative credit consequences for debt issuers across emerging markets, including companies, governments and banks.

"The on-again, off-again US tariffs and difficulty predicting US trade policy have negative credit consequences for debt issuers across emerging markets," Moody's said.

Besides, geopolitics is an additional stress for emerging markets, including the flare-up of tensions between India and Pakistan.

Exporters are most directly exposed to US tariff changes, but most debt issuers face indirect effects, Moody's said, adding tariffs will reach a much bigger and varied group of debt issuers indirectly through slowing economic growth and, for many, commodity price declines, currency depreciation and investor risk aversion.

"The raft of tariffs the US administration has announced, altered and paused this year has negative credit consequences for debt issuers across emerging markets, including companies, governments and banks," Moody's said.

Companies that rely on exports to the US are most exposed. But the wider effects of tariffs and trade uncertainty on consumer, business and financial activity will affect most emerging market entities, even as tariff deals emerge, it added.

In early April, the US administration announced and then paused for 90 days the implementation of sweeping, country-specific tariffs on trading partners.

It maintained a base 10 per cent tariff with exemptions for some sectors and higher tariffs imposed previously for other sectors including steel and aluminum.

The US also raised tariffs to 145 per cent on imports of most goods from China, prompting China to raise tariffs on US goods to 125 per cent – both in addition to already existing tariffs.

A month later, the US and China reached an agreement to lower some of the tariffs on each other for 90 days, effective May 14 to 30 per cent for US imports of Chinese goods and to 10 per cent for Chinese imports of some US goods.

"This development in US-China trade talks will help reduce some of the drag on global trade and improves the balance of risks around the global growth outlook," Moody's said.

But, US tariffs on other key trading partners and sectoral tariffs are either in place or still to be negotiated, and trade uncertainty will continue to weigh on consumer and business confidence and on spending and investment decisions, it added.

The US has begun trade discussions with a number of countries. And it reached a temporary tariff agreement with China in May, just days after reaching a separate deal with the UK.

"We expect conversations will open with other countries, but a complete reversal of tariff levels is unlikely," Moody's added.

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