JP Morgan chief executive officer (CEO) Jamie Dimon said in Dublin on Thursday that financial markets were too complacent about the outcome of US negotiations with trading partners on tariffs and pricing in a low probability of the Federal Reserve having to hike interest rates again.
Speaking at an event hosted by the Department of Foreign Affairs, America’s most influential banker said that US President Donald Trump “did the right thing to chicken out” when he did an about turn on his early April unveiling of a raft of tariffs against the rest the world – to give trading partners time to strike deals with Washington.
Earlier this week, the Trump administration decided to extend a 90-day pause on tariffs on certain trading partners, including a planned 20 per cent levy on imports from the European Union (EU), by a further three weeks, to August 1st.
Most imports from the EU into the US have faced a 10 per cent charge in the interim, with the steel and automobile sectors subject to higher levies.
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Talks have been ongoing over the last three months to agree a deal that would avoid EU products being hit with even higher blanket tariffs.
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But Mr Trump continues to make surprise announcements, saying this week that he may impose 200 per cent tariffs on imported pharmaceuticals and semiconductors.
He also announced plans for a 50 per cent levy on all Brazilian imports, partly in retaliation for what he sees as a “witch hunt” against his political ally, former president Jair Bolsonaro, who is facing trial for attempting a coup.
“Unfortunately, there is complacency in the market [about tariffs],” Mr Dimon said. Major stock market indices on both sides of the Atlantic have rallied strongly from a sell-off in April, after the initial tariff announcements, and are now at higher levels than before the badly received announcement.
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Noting that tariffs, tightening US immigration policy, and widening US budget deficit are each inflationary, Mr Dimon said that financial markets are also too optimistic about the Federal Reserve continuing to cut rates. Fed policymakers signalled last month that there could be two more rate cuts by the end of the year.
While Mr Dimon said that financial markets are currently only pricing in a 20 per cent probability that the Fed may need to change course and hike rates, he puts it at between 40 per cent and 50 per cent. “I would put that as a cause for concern,” he said.
Mr Dimon (69) has been CEO for almost two decades at JP Morgan, the world’s largest bank by market value, at $790 billion (€677 billion).
The banking giant’s total assets have grown 2½ times to $4 trillion since the end of 2007, helped by Mr Dimon being a go-to for US authorities when looking for a rescue buyer for banks during times of crisis. It bought ailing investment bank Bear Stearns and mortgage lender Washington Mutual (WaMu) in 2008. During a regional banking crisis in the US two years ago, JP Morgan took over California-based First Republic Bank.
JP Morgan employs about 1,450 in Ireland, including hundreds in Clonakilty-based fintech Global Shares, which it acquired three years ago for about €665 million.
While Mr Dimon praised Ireland’s open economy and business-friendly policies, he said that the wider European economy has a “huge competitiveness problem” compared to the likes of the US and China.
