Trump's new tariffs on China might shrink the global economy, says bank CEO

President Donald Trump's new tariffs on China could "shrink" the global economy, said the chief executive of Singapore's second-largest lender by assets, Oversea-Chinese Banking Corp, on Friday.

"It's not good for Asia's economy, it's not good for China, but it's also not good for the U.S. — because ultimately, we are not able to utilize the efficiencies that each of the economies are able to offer, and then grow globally," Samuel Tsien, OCBC's chief executive officer, told CNBC's Martin Soong.

"So, the end result of that is that it is likely to shrink the economy by not being able to take advantage of the efficiencies in each of the different markets," Tsien said.

On Thursday, Trump announced that the U.S. will slap an additional 10% tariffs on $300 billion worth of Chinese goods to the U.S.

The tariffs will take effect from September 1, . It comes amid ongoing trade talks between the two countries, which resumed in Shanghai this week after months of stalled negotiations.

Economists have predicted that several countries would stand to gain from the trade fight, as companies adjust their supply chains and shift manufacturing activity to economies not affected by the tariffs.

A view of Marina Bay Sands at sunrise on Sept. 18, 2016 in Singapore.

Rustam Azmi |Getty Images

However, Tsien said that moving distribution away from China will be less significant than people believe. That's largely because shifting production out of China involves a shift in hardware and software as well.

"For those companies who already have an established presence in the Southeast Asian countries — such as in Thailand, Vietnam, and Malaysia — they have increased capacity ... with respect to new companies migrating over, we hear a lot of talk," Tsien said at OCBC's earnings briefing. "People would like to do it, but there is not much real investment that has been made yet."

OCBC earnings

Singapore lender OCBC reported Friday that second-quarter net profit rose 1% increase compared to a year ago. This put its net profit at 1.22 billion Singapore dollars ($886 million) — driven in part by a rise in fee income, particularly in higher wealth-management fees.

Net interest margin, a key indicator of profitability for banks, was up 12 basis points, at 1.79%. That was attributed to increased asset yields in Singapore, Hong Kong and China.

For the first half of 2019, OCBC announced an interim dividend of 25 cents per share — that's 5 cents higher than last year.

Smaller Singapore lender United Overseas Bank also reported earnings on Friday. Net profit in the second quarter of 2019 was 1.17 billion Singapore dollars — up 8% from a year ago.

On Monday, DBS Group, Southeast Asia's biggest lender, reported a 17% rise in its second-quarter earnings, to hit 1.60 billion Singapore dollars.

All three lenders are heavyweights on the benchmark Straits Times Index, which closed 0.94% lower on Friday. Stocks of all three banks declined the same day.

Read More