HSBC yesterday sounded the alarm over ‘heightened uncertainty’ and a ‘significant drop’ in trade between the US and China as Donald Trump’s trade war rages.
Boss Georges Elhedery said the President’s tariffs were driving a ‘reconfiguration’ of the global economy and had also resulted in ‘some slowdown in the trade activity between the UK and US’.
And the Bank of England’s regulatory chief Sam Woods warned that the fall-out from Trump’s shock ‘Liberation Day’ tariff announcement was far from over.
‘We consider ourselves to be still in the middle of this thing,’ said Woods, chief executive of the Bank’s Prudential Regulation Authority (PRA).
Elhedery was speaking as HSBC reported a 25 per cent drop in first-quarter profits to £7.1billion – mainly due to one-off costs.
But the bank also reported an ‘expected credit loss’ – a provision for loans going bad – of £650million, including £110million to reflect heightened uncertainty and said that a further deterioration in the trade war could pile a further £370million on top of that.
Concerned: HSBC boss Georges Elhedery (pictured) said Trump’s tariffs were driving a ‘reconfiguration’ of the global economy
The scenario covers the possibility of an economic downturn in which unemployment rises, lending seizes up, markets slide and house prices fall, with affected sectors including the car industry, retail, clothes makers, transport and logistics.
A HSBC spokesman said: ‘The macroeconomic environment is facing heightened uncertainty, in particular from protectionist trade policies, creating volatility in both economic forecasts and financial markets and adversely impacting consumer and business sentiment.
‘Given current levels of uncertainty and market turmoil, we expect demand for lending to remain muted during 2025.’
HSBC is based in London and Hong Kong and makes most of its money in Asia. It is in the firing line of the trade war which has seen Washington impose 145 per cent tariffs on China and Beijing retaliate with 125 per cent duties on the US – crushing trading between the world’s two biggest economies.
Elhedery said: ‘We have seen a significant drop in volumes along the US-China corridor.’ He added that he was ‘hopeful’ of progress in trade negotiations and that it was ‘critical and paramount that the US dollar remains the currency of choice’ amid a sharp fall in the greenback during the recent turbulence.
Elhedery said he was ‘optimistic and confident’ in the outlook for the UK.
But he attacked Britain’s ring-fencing rules, in a salvo likely to be noticed in the Treasury where Chancellor Rachel Reeves has indicated her determination to slash red tape.
The rules, which force banks to separate their day-to-day High Street banking arms from their more risky investment banking divisions, are unique to the UK and have ‘become redundant’, he said – increasing costs and stifling competition.
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This article was originally published by a www.dailymail.co.uk . Read the Original article here. .