Barclays PLC (LSE:BARC) shares dropped 8% in early Monday trading as markets reacted sharply to President Donald Trump’s sweeping global tariffs. The move has stoked fears of a trade war and a potential global recession, a toxic mix for banks.
Economic slowdowns tend to hit lending activity, reduce deal-making, and increase the risk of loan defaults, all of which weigh on bank earnings.
Barclays is particularly exposed through its sizeable investment banking arm, which relies on market stability and business confidence to generate fees from trading, mergers, and capital raising.
A prolonged period of volatility and tightening financial conditions could see corporate clients hold off on deals. Combined with falling asset prices, that puts pressure on Barclays’ revenue and profit outlook.
"Tariffs and global recession fears [have] led to a significantly negative market reaction for European banks, a high beta sector sensitive to macroeconomic conditions," said Deutsche Bank in a note.
"This was especially pronounced given the meaningful increase in bank valuations YTD and generally optimistic investor positioning going into the Wednesday announcement."
In early trading, the shares were off 20.9p at 229.1p.