Dimon says Trump tariffs may make 'the soft landing a little bit softer' instead of making the 'ship go down'

JPMorgan Chase CEO Jamie Dimon anticipates that tariffs may soften the economic landing, potentially causing a slight decrease in employment and a marginal increase in inflation. Citigroup's Viswas Raghavan noted clients are bracing for tariff levels between 10% and 20%, while expecting investment banking fees to rise in the mid-single digits for Q2, though credit costs are projected to increase by several hundred million dollars. Morgan Stanley CEO Ted Pick observed a sluggish start to Q2 followed by a recent rebound, with investment banking activity showing a split performance between the periods.

Analysis

Senior banking executives offer a cautiously nuanced outlook on the U.S. economy and financial sector, primarily influenced by impending tariffs and potential regulatory shifts. JPMorgan Chase CEO Jamie Dimon anticipates tariffs might temper the economic 'soft landing' rather than induce a severe downturn, projecting a slight decrease in employment and a marginal rise in inflation as potential outcomes observable from July onwards. Concurrently, Citigroup clients are preparing for tariff levels with a 10% floor, potentially ranging up to 20%, contributing to anxiety in corporate deal-making. Despite this, Citigroup projects a 'mid-single digits' year-over-year increase in Q2 investment banking fees and 'mid- to high-single digits' growth in overall trading revenue, though it also anticipates firmwide credit costs to rise by 'a few 100 million dollars' from Q1's $2.7 billion. Morgan Stanley CEO Ted Pick described Q2 as a 'tale of two quarters' for investment banking, with an initial slowdown following tariff announcements in early April giving way to a strong finish; bankers, including Pick, have also hailed a potential reconsideration of bank capital rules, with the Federal Reserve planning a conference to review these requirements, viewing changes as opportune for enhancing their support of the real economy.

Key Decisions for Investors

• Investors should monitor key economic data releases from July through October for tangible evidence of tariff impacts on employment and inflation, aligning with Jamie Dimon's anticipated timeline.
• Consider the divergent Q2 outlooks for major banks: Citigroup projects 'mid-single digits' growth in investment banking fees and 'mid- to high-single digits' growth in trading revenue but also an increase of 'a few 100 million dollars' in credit costs from Q1's $2.7 billion, while Morgan Stanley anticipates a strong finish to Q2 investment banking after an initial slowdown.
• Keep abreast of discussions surrounding bank capital rules, as the Federal Reserve's planned conference and potential regulatory adjustments could significantly influence bank profitability and their capacity to support economic activity, a development viewed positively by industry executives.