Fitch Ratings warned that recent political developments in Türkiye, including the arrest of Istanbul’s mayor Ekrem İmamoğlu and subsequent protests, have caused market volatility and could disrupt the recent positive momentum in Turkish financial institution (FI) ratings.

Turkish banks are the most vulnerable in the near term due to their significant exposure to foreign currency (FC) volatility and external debt. Although banks have seen rating upgrades since the 2023 elections, persistent unrest and shifts in investor sentiment could heighten refinancing risks and increase dollarization. Akbank’s successful loan rollover is a positive sign, showing that markets have not yet turned away.

Lira depreciation could strain banks’ capital adequacy by increasing FC risk-weighted assets, while higher interest rates delay margin recovery. Asset quality might deteriorate further if macroeconomic conditions worsen.

Currently, most large Turkish banks are rated ‘BB-’, with those at ‘B+’ or below on Positive Outlooks based on improved market access and economic rebalancing expectations. Fitch maintained its base case for the continuation of Türkiye’s economic program, reflected in the central bank’s rate hike to 46%. However, if volatility continues or policy direction changes, Fitch could revise the banks’ outlooks to stable.

Non-bank financial institutions are more insulated but still face risks. Lessors may see declining demand due to currency risks, while factoring firms—exposed to SMEs—are sensitive to credit risk but can adapt quickly. Most insurers are shielded in the short term due to their conservative portfolios, though the long-term impact depends on inflation, interest rates, and exchange rates.

Overall, while Fitch has not changed any ratings yet, sustained volatility or a policy shift could lead to rating outlook downgrades, especially if the government’s foreign currency reserves weaken relative to banking sector liabilities.

https://www.fitchratings.com/research/banks/turkish-market-volatility-could-disrupt-fis-rating-momentum-22-04-2025

UBS Research analyzed the potential impact of President Trump's proposed reciprocal tariffs, which would impose tariffs on imported goods at the same rate that other countries apply to U.S. exports. While the concept of reciprocity exists in trade agreements, it has not typically been applied at the individual product level.

The study examined tariffs across 12,500 product lines and 200 trade partners, finding that reciprocal tariffs would increase the U.S. weighted average import tariff by 1.65 percentage points, with developed markets seeing a smaller impact of 0.8 percentage points and emerging markets a larger one of 2.2 percentage points. The countries most affected would be India, Argentina, Indonesia, Thailand, Saudi Arabia, Brazil, and Turkey, with Vietnam and Thailand facing the highest GDP risk due to their trade exposure to the U.S.

From a global perspective, reciprocal tariffs would be significantly less damaging than a blanket global tariff. A hypothetical 10 percent blanket U.S. tariff could lower global GDP by one percentage point, while reciprocal tariffs would have only about one-fifth of that impact.

The analysis found no clear evidence that the U.S. is uniquely disadvantaged by current tariff structures. While U.S. agricultural exports face higher foreign tariffs, about five percentage points higher than U.S. import tariffs on agricultural goods, the U.S. also protects textiles disproportionately, with a four percentage point advantage in its own favor.

UBS estimates that reciprocal tariffs would generate between 18 and 32 billion dollars in annual revenue, equivalent to 0.1 percent of U.S. GDP. Given the modest revenue impact and complex cost-benefit considerations, the study suggests that the U.S. might ultimately pursue a different combination of tariffs, as Trump has hinted at further tariff actions beyond reciprocity.

The findings indicate that reciprocal tariffs would primarily affect emerging markets, raise limited revenue, and might not be the most effective trade strategy.