Standard Chartered gets down to 'war-gaming' Trump trade battles

CEO Winters says bank planning in case 'things get very messy'

One of the world’s biggest emerging-market banks says it’s “war-gaming” trade disruptions after US President Donald Trump’s election.

Standard Chartered Chief Executive Officer Bill Winters, the former head of JPMorgan Chase & Co’s investment bank, said he’s mapping out scenarios “if things get very messy and we get into the trade war zone,” which would “almost certainly” drive investment out of the US and Europe and into Asia, where China would take the lead role in a super-regional trade bloc.

“There’s obviously a stage in the world where everything gets locked down and global trade gets reduced fundamentally and investment is reduced substantially,” Winters said on his annual results call with analysts Friday. “There is a part of the world that may want to throw up the borders, and there is another part of the world that’s going to try to take advantage of that.”

Leaders of the world’s biggest banks are warning investors of President Trump’s potential to roil global markets and slow down global trade. China is bracing for tensions with Trump after he accused the world’s largest trading nation of unfair market practices throughout his campaign. The Chinese government has been asking companies to estimate the highest duties they can bear, fearing an “iron curtain” of American protectionism.

A knock-on effect of the US pulling out of the Trans-Pacific Partnership, raising tariffs and trying to “re-domesticise jobs” could be the “super-regionalisation” of trade in Asia, Winters said. 

That could benefit the bank because it makes almost all of its revenue in the region, despite being based in London. Standard Chartered is the one of the world’s largest trade-finance banks, with HSBC Holdings taking the top spot. Earlier this week HSBC executives also cautioned US protectionism may impact their business and strategy.

“No surprise that when the US terminated its commitment to the TPP the first thing that the Chinese did, and it was quite welcomed, was the establishment of the regional trade organisation,” Winters, 55, said. “Obviously, it will take some time for that to come into play, but the intent is clear.”

The CEO said he didn’t think a full-blown trade war is likely, but he expects some action from the new US administration. China has been readying a plethora of retaliatory tactics that include subjecting well-known US companies to tax and antitrust probes should Trump wage a trade war, people familiar with the matter told Bloomberg in January. Winters said he’d seen Asian companies’ behaviour start to change already.

“Clients in our markets are focusing on diversifying trading partners as much as possible to avoid a cliff-edge effect,” if Trump’s administration implements protectionist policies, Winters said. “If the US for whatever reason makes itself a less desirable trading partner, some other countries will be willing to fill that gap.”