Happy Wednesday. Today, we're diving into UPS’s plan to cut 20,000 jobs — and how European banks are the unlikely beneficiaries of Trump’s trade policies.

Trump’s Tariffs Are Making European Banks Cool Again

Uncle Sam, trying to play tough with global trade, is inadvertently providing European banks with an unexpected silver lining. It's almost Shakespearean—the protagonist doing himself harm, and others benefiting quietly in the wings.

Deutsche Bank and HSBC, giants across the pond, reported surprisingly robust first-quarter numbers this week. Deutsche Bank, in particular, raised eyebrows with a pretax profit of €2.8 billion ($3.2 billion)—a figure they haven't touched since early 2011. Who'd have thought? The kicker was a powerful performance on bond and FX trading desks, bolstered further by a profitable upswing among German consumers and small businesses. Maybe there's life left yet in Europe's banking behemoth.

HSBC, the Asia-centric juggernaut, also delivered a pleasant surprise, turning in a $9.5 billion profit—less than last year but far ahead of expectations. What's intriguing here is the strategy: clients fleeing U.S. stocks and moving toward Asia-centric investments—equities, bonds, even plain old cash—gave HSBC's fee income a tidy bump. Apparently, in uncertain times, cash still reigns king.

Now, there's an elephant in the room: Trump's tariffs. The current figures don’t reflect the impact yet, since the tariffs dropped after Q1 wrapped up. Both Deutsche Bank and HSBC acknowledged the looming uncertainty, but their provisions for potential losses were comparatively modest—€70 million and $150 million, respectively. Contrast that with JPMorgan’s nearly $1 billion war chest built to brace against recessionary gusts, and it's clear these European counterparts aren't panicking just yet.

HSBC ran its own scenario planning—a sort of doomsday-lite exercise—and even under these "adverse but plausible" conditions, anticipates only moderate revenue hits and manageable extra credit losses. CFO Pam Kaur didn't reveal the specifics but implied they're nowhere near as harsh as the economic devastation we saw in 2020. That said, certain U.S. manufacturing chiefs, judging by the latest Dallas Fed survey, might not share this somewhat rosy outlook—some are feeling pain even deeper than during COVID’s worst days.

But here's the thing—the unintended consequences of Trump's trade skirmishes might still play out favorably overseas. Deutsche Bank foresees a major uptick in Europe, driven by governmental investments, especially in Germany, potentially igniting economic engines and consumer confidence heading into next year and beyond.

HSBC’s optimism lies further east, anchored by expanding trade and consumer appetite between Asia and the Middle East. Sure, direct trade between China and the U.S. has stalled, frozen under the chilling effect of tariffs. Yet, HSBC points out this damage has largely missed their sweet spot, with Asia-to-Middle East commerce humming steadily along.

Both banks are bullish enough to stick by their full-year profit forecasts. HSBC even sweetened the deal, launching another $3 billion stock buyback this quarter—a reassuring gesture for shareholders amidst the swirling global uncertainty.

Now, could all this still unravel dramatically? Absolutely. We're dealing in economics here, a game of endless moving parts. Yet, one narrative emerging powerfully is the sheer resilience of business outside America's borders—call it globalization’s ironic triumph in the shadow of American protectionism.

UPS to Cut 20,000 Jobs

The delivery behemoth just announced it's shedding 20,000 operational roles this year. Why? Because they walked away from their biggest customer, Amazon. Talk about gutsy.

Let's unpack this. Amazon wasn't just any client—it represented a substantial 12% chunk of UPS's revenue pie. That’s not pocket change. Yet UPS made a calculated gamble to reduce its reliance on the e-commerce giant. It’s bold. It’s risky. And frankly, it’s fascinating.

Now, this isn't their first rodeo; last year UPS quietly slashed about 12,000 jobs—primarily managerial—and shuttered 11 buildings. This year, the company’s scaling up those cuts, planning to close a staggering 73 facilities. CEO Carol Tomé calls it timely, especially amid this macroeconomic haze—with trade wars and tariffs adding yet another layer of complexity.

But there's another layer beneath the headline numbers. About 330,000 UPS employees belong to the Teamsters union, led by Sean O’Brien, who isn't exactly known for pulling punches. According to O’Brien, UPS has contractual obligations to add 30,000 Teamsters roles—not eliminate them. He's made it crystal clear: cut management all you like, but touch union jobs and expect an all-out battle. It's a tense dance that's just beginning.

Amid this labor tightrope walk, UPS is betting heavily on automation. Labeling, loading, unloading—robots might soon dominate these tasks traditionally performed by humans. Automation might be inevitable, sure, but I wonder how smoothly it’ll go over with union negotiators.

And what about the broader numbers? UPS's first-quarter earnings weren't shabby at all—$1.19 billion net income on $21.5 billion revenue, beating Wall Street forecasts. Yet the company remains cautious, choosing not to update its full-year outlook, citing "economic uncertainty." Translation: they see storm clouds ahead and aren't pretending otherwise.

They're bracing, too, for restructuring expenses—possibly up to $600 million. That’s a hefty bill, but perhaps a necessary one for a leaner, meaner UPS.

Ultimately, UPS's gamble isn’t merely about dropping Amazon or embracing automation—it’s about reshaping its entire business model in a rapidly evolving economy.

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DISCLAIMER: None of this is financial advice. This newsletter should be used for discussion, education, and illustrative purposes only and should not be construed as professional financial advice, solicitation, or recommendation