Impact of Trump's Trade War Unleashing Global Economic Uncertainty
HSBC issues warning about Trump's tariff turbulence, predicting a notable decrease in trade transactions between the U.S. and China
Donald Trump's trade war is wreaking havoc on the global economy, with HSBC sounding the alarm over rising uncertainty and a dramatic drop in trade between the U.S. and China.
Economic Rearrangement
HSBC's boss, Georges Elhedery, warns that Trump's tariffs are causing a considerable shake-up of the global economy. The tariffs are not only slowing the trade activity between the UK and US but also leading to a reconfiguration of the global economic landscape.
The Bank of England's Perspective
The Bank of England's regulatory chief, Sam Woods, shares the same sentiment, stating that the repercussions of Trump's shock tariff announcement are far from over. According to Woods, we're still smack dab in the middle of this thing.
HSBC's Financial Performance
HSBC reported a 25% drop in first-quarter profits to £7.1billion, mostly attributable to one-off costs. However, the bank also set aside £650million as an expected credit loss, including £110million to reflect the heightened uncertainty stemming from the trade war. A further escalation in the trade war could tack on an additional £370million to that provision.
Economic Downturn Scenarios
The ongoing trade dispute could result in increased unemployment, a seize-up in lending, plummeting markets, and drops in house prices, impacting sectors such as the car industry, retail, clothes makers, transport, and logistics.
A HSBC Spokesperson's Take
A HSBC spokesperson expressed concerns about the murky economic environment, stating the uncertainty caused by protectionist trade policies and the resultant volatility in forecasts and financial markets, leading to a dampening of consumer and business sentiment.
HSBC's Global Presence
Based in London and Hong Kong, HSBC is exposed to the ongoing trade war, which has seen Washington impose 145% tariffs on China and Beijing retaliate with 125% duties on U.S. exports. Elhedery shared that there has been a noticeable decrease in trade volumes along the US-China corridor.
Trade Negotiations Optimism
While the situation remains uncertain, Elhedery expressed optimism about the progress in trade negotiations. He highlighted how it's essential that the USD maintains its status as the currency of choice amid a steep decline during the recent turbulence.
British Economy Outlook
Elhedery expressed optimism and confidence regarding the UK's economic outlook. Despite this, he took a shot at the ring-fencing rules unique to the UK, mentioning that they have become redundant and have hiked costs while curbing competition.
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[1] Boston Consulting Group: "The Global Impact of U.S. Tariffs on Imports from China."[2] International Monetary Fund: "World Economic Outlook Update, July 2019."[3] Peterson Institute for International Economics: "U.S.-China Tariff War: Damage and Prospects."
- Given the ongoing trade war, it's likely that the tariffs imposed by Donald Trump are causing a significant deterioration in the global economy, particularly in the banking sector, as HSBC reports a 25% drop in first-quarter profits.
- The repercussions of Trump's tariff announcement are far from over, suggests Sam Woods, the Bank of England's regulatory chief, as the global economy undergoes a reconfiguration due to this economic uncertainty.
- As HSBC prepares for further escalation in the trade war, it has set aside £650million as an expected credit loss, including £110million to reflect the heightened uncertainty caused by this trade conflict.
- The ongoing trade dispute between the U.S. and China could lead to a possible economic downturn, with potential consequences such as increased unemployment rates, a seize-up in lending, plummeting markets, and drops in house prices impacting various sectors like the car industry, retail, and logistics.
- In the face of unpredictable financial markets and protectionist trade policies, a HSBC spokesperson expressed concerns about the murky economic environment and its impact on consumer and business sentiment.
- Based in both London and Hong Kong, HSBC is exposed to the ongoing trade war and has experienced a noticeable decrease in trade volumes along the US-China corridor due to the imposed tariffs and resulting economic uncertainty.
