Swiss banking giant UBS warns of stagflation risk amid tariff dispute

Swiss banking giant UBS has warned that stagflation — stagnant growth and high inflation — may be the next big threat. 

UBS Group AG’s Asia Pacific President, Iqbal Khan, described stagflation as investors’ primary risk while identifying select opportunities in the existing economic environment.

Stagflation Fears Rise Amid Trade Tensions and Central Bank Measures

Addressing Bloomberg’s Family Office Summit in Hong Kong, Khan said that perhaps the biggest question in the market today is how fast the economy grows and whether stagflation—a situation marked by weak growth, high unemployment, and high inflation—is the new normal. He noted:

“That’s the real risk out there and that’s what everybody wants to avoid. And I think most of the central banks including the Fed is clearly very very focused on that.”

The warning comes as central banks around the world tighten their belts in a bid to tame inflation, disruptions in the global supply chain, and increased trade restrictions, which are complicating economic projections.

The ongoing tariff dispute between major economies is one of the major factors fueling stagflation risks. Policy adjustments in recent years, notably between the U.S. and China, have raised new concerns about how trade constraints will affect global supply chains. 

Higher tariffs on key commodities and high-tech exports increase production costs and fuel inflation, complicating the economic outlook.

UBS acknowledges risks related to such trade tensions, but Khan noted that pockets of opportunities still exist. He said Europe was exhibiting signs of renewed economic focus, for example, and China and Europe remained relatively low-cost investment destinations with growth potential despite short-term headwinds.

UBS expands in Asia-Pacific with new Hong Kong Tower and leadership moves

UBS is the biggest wealth manager in the Asia-Pacific region and continues to cement its place there. Zurich-based UBS, which has more than 900 client advisers in the region, faces stiff competition from HSBC and regional players like DBS Group. 

To strengthen its claim, UBS intends to rent a 14-story office tower currently under construction in Hong Kong’s West Kowloon district, which is scheduled to be finished in 2026.

Khan, who moved to Hong Kong last year, has been instrumental in shaping UBS’s Asia strategy. His appointment as Asia-Pacific president in 2024 was part of a wider corporate rejig, including the expanded role of investment-banking head Rob Karofsky. 

Both executives are considered potential successors to UBS Chief Executive Officer Sergio Ermotti, who is set to leave the post by early 2027.

UBS urges strategic investing amid inflation and trade disruptions

The state of the economy may have weighed on the outlook. Despite this, Khan had previously addressed concerns regarding the long-term outlook with measured optimism. UBS recommends that investors take a more “strategic” view and focus on sectors and regions that can withstand inflationary pressures or trade disruptions.

The trick is identifying those market opportunities that respond to new economic realities. According to Khan, solutions are always available to surmount challenges and help people keep up with growth, even amidst uncertainty.

With inflation climbing and trade tensions continuing globally, the bank’s advice on stagflation reminds investors to stay alert and adaptable to an evolving financial landscape.

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