Davis Polk partner and Financial Institutions practice head Margaret Tahyar was quoted in American Banker discussing the potential impact of tariffs on banks.

The article noted that the banking industry isn’t directly impacted by tariffs in the same way that manufacturing or farming sectors might be, but banks’ central roles in intermediation of capital mean that their fortunes tend to rise and fall with the broader economy.

“What if you’re the company in South Bend, Indiana, that clears the snow from the factory parking lot? What if you’re the chain of local auto shops?” said Margaret. “Those guys are relying on the small- and medium-sized banks that are in their community. So it’s the same story that’s over and over and over again: if we hit a recession, then people default on loans.”

“The combination for banks is the combination of interest rates going down — because if we have a recession then interest rates are going to go down — so that’s pressure on net interest margin at the same time that you have increased credit risk,” she added. “So right now everything depends on how long this lasts.”

“Tariffs put banks in a tight spot with Trump,” American Banker (April 7, 2025) (subscription required)

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