Monday Market Minute | Feb 09, 2026

trade war fallout deepens — private credit fills the gap as banks pull back

What Moved

The trade war's second-order effects are now showing up where they matter most for private market investors: bank lending desks. Canadian banks tightened credit standards again this quarter, citing trade-related uncertainty and deteriorating borrower outlooks in export-dependent sectors. The result is a widening displacement opportunity for private credit. Mid-market borrowers who would normally refinance through traditional channels are turning to alternative lenders willing to price risk appropriately. Meanwhile, on Capitol Hill, the US House voted 219–211 on February 12 to repeal tariffs on Canada in a rare bipartisan move — but the bill faces long odds in the Senate. Markets rallied briefly on the headline before settling back into wait-and-see mode. Private credit deal flow is up noticeably, with managers reporting fuller pipelines than any quarter since early 2024.

Why It Matters

This is the displacement cycle private credit investors have been positioning for. When banks retreat, alternative lenders advance — but not all displacement is created equal. The strongest opportunities are in sectors with durable Canadian demand (essential services, healthcare, logistics) where borrowers face a liquidity squeeze unrelated to their underlying business quality. For HNW investors allocated to private credit funds, the current vintage may prove exceptional. The risk is duration: if tariffs persist beyond mid-year, some borrowers who look temporarily squeezed could face structural impairment.

Signal to Watch

Track the Bank of Canada's Senior Loan Officer Survey due later this month. A third consecutive quarter of tightening would confirm the displacement thesis and signal that private credit's pricing power has room to run.

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