HSBC warns of rising impact from US China trade tensions and global economic shifts

HSBC, the London-based bank with deep roots in Asia, has cautioned that US-China trade tensions are already taking a toll on global trade volumes. The bank, which is the world’s largest trade financier, revealed that the imposition of tariffs has hampered transactions on the US-China trade corridor, with certain sectors not benefiting from waivers or tariff reductions.

In its first-quarter report, HSBC set aside $876 million for potential bad loans, with $150 million earmarked for forward economic declines driven by the growing fragmentation in global markets. Pre-tax profits for the quarter dipped to $9.5 billion, down from $12.65 billion a year earlier, which had been bolstered by the sale of its Canadian business. However, this result surpassed analysts’ forecasts of $7.8 billion.

The bank highlighted the potential for an additional $500 million in provisions under scenarios involving sustained tariffs and broader economic repercussions. Georges Elhedery, HSBC’s Chief Executive, emphasised that the volatility in global trade patterns reflects a “reconfiguration” of globalisation rather than its decline. He noted that trade is shifting toward intra-regional frameworks, reshaping trade routes and volumes.

HSBC’s position as a key financial bridge between East and West amplifies its exposure to economic pressures arising from tariffs and protectionist policies. Hong Kong, the bank’s largest market, remains central to its operations, despite mounting challenges associated with the global trade environment. The geopolitical divide between the US and China creates added complexities for the bank’s strategic positioning.

In a positive development, HSBC endorsed a share buyback worth up to $3 billion and declared an interim dividend of 10 cents per share, amounting to an additional $1.77 billion in shareholder returns. Investor confidence was reflected in a 2.6 per cent rise in the bank’s share price, closing at 855.5p.

Elhedery reiterated that HSBC’s restructuring programme remains on track, with the bank aiming to cut $1.5 billion in costs by the end of 2026. While the overhaul will result in significant job losses, the bank is committed to maintaining pace with its transformation agenda, which aims to streamline operations and enhance efficiencies across its global network.

Despite the challenges, HSBC’s management is optimistic about the group’s resilience and its ability to navigate ongoing disruptions. The bank views its wealth management business and regional trade recalibrations as key components in its long-term growth strategy, offering opportunities amid economic turbulence.