No word better describes the impact from President Donald Trump’s tariffs over the past few weeks than uncertainty. From the initially very high tariffs to the lower charges under the 90 day pause, to the trade war between the US and China, the events of the last few weeks have left the business world reeling.
Add the fact that it is not clear how much longer this will go on for and what the future status quo will ultimately look like, and you have a situation where developing any kind of strategy involving cross-border trade becomes near impossible.
Inevitably, the cross-border payments industry is feeling the impact, and will continue to do so in one form or another for some time. From banks to fintechs, the companies that facilitate the payments for global trade are obviously highly exposed to changes in payments flows, such as those that may occur when the cost of goods from a given country change significantly overnight.
However, while there are unique challenges for the space, there are also potential benefits, with some players already seeing some initial effects.
The tariffs’ cross-border payments headwinds
The biggest potential negative impact from the tariffs comes in the form of a reduction in cross-border payments flows, which if it comes to pass is likely to result in lower revenues for companies delivering those payments.
However, how much of a hit – if any – flows are set to take is not yet clear, with tangible numbers only likely to begin to appear when companies report their Q2 2025 earnings in around three months’ time. Furthermore, not all companies are likely to be impacted equally.
When the tariffs were first announced, almost every publicly traded company touching the cross-border payments industry, as well as many outside of it, saw a drop in their share price, however for those providing consumer money transfers the long-term impact is likely to be negligible directly. The tariffs only impact goods, so a migrant sending money home to their family or a person moving across borders to pay for their child’s tuition at an international school is not going to be affected by them directly.
That may change if the macroeconomic environment does lead to a significant economic downturn, as a recession or similar situation is likely to lower consumer spending. However, the Covid-19 pandemic showed us that while tougher financial conditions impact consumer spending abroad for luxuries, migrants generally prioritize remittances over other expenses.
Those who provide cross-border payments services to companies buying and selling goods across borders, as well as those who provide the networks those payments are sent over, are more likely to be directly affected, particularly if sustained tariffs on specific goods directly impact a high portion of their client base.
This places the transaction banking portion of major banks and B2B payment providers at potential risk, as well as those who offer such services to SMBs. However, certain companies may be more exposed than others due to the verticals they have a higher footprint in and the corridors they serve.
A business that largely caters to US businesses paying for goods from China or cars from Mexico, for example, is going to be far more exposed than one largely serving businesses outside of the US paying for goods and services beyond America. Similarly, those trading with tight margins are likely to be affected sooner, as they will be less able to absorb additional costs incurred as a result of the tariffs, than those with higher margins.
A wider challenge across the industry, however, is corporate credit risk. Multiple organizations, from the IMF to S&P, have warned of increased global credit risk as a result of the current financial conditions, with the IMF describing a “sharp repricing of risk assets” in its most recent Global Financial Stability Report, published on April 22. Such an environment makes gaining access to credit more challenging for some businesses and may make general operating conditions in the sector tougher, reducing operating margins.
The tariffs’ cross-border payments tailwinds
While a reduction in global payment flows is a potential challenge over the next few months, the initial industry reaction has included some more positive elements – and there are opportunities ahead for many in the sector.
For many of the organizations my company works with, the initial impact was an increase in trading activity, as well as increased demand for financial services, such as hedging products, that reduce a company’s exposure to currency volatility.
This type of product in particular creates a key opportunity for many companies on the B2B side, particularly those serving larger corporations and enterprises. If such uncertainty continues, demand for additional services that reduce risk is likely to go up, and some in the industry are already anticipating sustained increased demand in this area.
Citi is one such organization, with CEO Jane Fraser saying that the company expected to be “very busy” facilitating both changing cross-border trade flows and “hedging and associated financing activity”.
For SMB-targeted businesses, however, there is less opportunity for such solutions, with typical products being far simpler and not involving risk-based additions.
Beyond this, there is potential for where money moves globally to shift rather than just reduce, creating opportunities not only for additional services to support clients entering new markets, but also to support the use of previously less popular currency pairs, which in some cases may attract greater margins.
Shielding the industry from risk
While there are potential benefits, there is also a need to ensure that the industry is as well protected from any macroeconomic shocks as possible. Initial earnings calls have seen multiple banks, including Goldman Sachs and the Bank of America, remain reluctant to project a severe financial impact, but urge a strategy that reduces the current levels of uncertainty.
“We are encouraged by the administration’s recent actions to pursue a more gradual policy process that allows for considered negotiations with many countries, but how policies will evolve is still unknown,” said David Solomon, Chairman and CEO of Goldman Sachs.
“We are hopeful that feedback from companies large and small, institutional investors and ultimately consumers will support an approach that will lead to greater economic certainty and long-term growth.”
There are also movements from beyond the US to tackle vulnerabilities in the financial system that the current tariff situation risks impacting. On April 23, Klaas Knot, Chair of the Financial Stability Board, released a letter to the finance ministers and central bank governors of the G20 where he argued that there was a need to “take measures to protect and enhance the resilience of the global financial system”.
Alongside topics including digitalization and climate change-related financial risks, he highlighted cross-border payments as an area with “immense potential” for improvement, particularly aided by digital innovation. However, he acknowledged that it was unlikely that at current levels the industry would reach the 2027 targets laid out in the G20 Roadmap for Enhancing Cross-Border Payments, calling for “significant work up to and beyond 2027” to improve cross-border payments infrastructure and services, particularly in parts of the world where options remain limited.
While such concerns are a country and industry-level challenge, on an individual level companies have considerable opportunities from the current uncertainty, but they are also at risk of being highly exposed. Those who can react to change quickly and maintain a broad geographical mix are in the strongest position to make the most of the year ahead – no matter what it may present.
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