Bank trading desks are minting money from Trump’s tariff chaos

Wall Street is raking in even more money from trading than it did during the market’s Covid-19 era swings.

Goldman Sachs, JPMorgan Chase and Morgan Stanley all said a surge in trading revenue helped lift their profits in the first quarter and beat expectations. Bank trading desks have been collecting more fees from investors scrambling to reduce or dial up the risk in their portfolios on any new clue about how President Trump’s tariffs might ultimately play out.

Combined, the three banks earned more than $12 billion in fees in their equities businesses, the desks that run stock-market related activities for clients. That tops the trading boom that followed some of the pandemic’s worst days.

The jump came even before Trump’s “Liberation Day" announcements on April 2 sent markets into a tailspin. Stock markets then had a massive one-day rally after Trump paused most of his so-called reciprocal tariffs. Wall Street executives have warned that Trump’s tariffs and the uncertainty around them could push the economy into a recession. That would hurt their businesses by leading to a pullback in corporate borrowing and dealmaking.

For now, Wall Street expects trading desks to keep benefiting.

“We’re early in the quarter, but so far, the business is performing very well and clients are very active," Goldman CEO David Solomon said Monday during a call with analysts. “And so, I know there is a higher level of uncertainty, but at the same point, they’re active, people are shifting positions, and we still see significant activity levels."

While the gains in revenue from fixed-income, currency and commodities trading weren’t as big in the first quarter, Trump’s recent tariff moves have been spurring more volatility in Treasurys. Currencies are also driving a lot of the trading volume at the moment, Solomon said, adding that the bank is seeing “extraordinarily high, record activity levels."

At the start of the year, investors and bankers were bullish on the incoming Trump administration. Many investor portfolios were positioned for so-called American exceptionalism trades, with an expectation that U.S. stocks and the dollar would continue to accelerate. By the end of March, the S&P 500 and Nasdaq Composite had fallen to their worst quarters since 2022 after Trump’s escalations on tariffs had economists and traders rethinking their expectations.

More recently, clients are trading out of the U.S. exposure and increasing their bets on international assets, including to Europe and South America, according to bank executives.

All of the turns in policy amount to more trading. Goldman booked a record quarter for its equities business in the first three months of the year, with revenue up 27%. JPMorgan last week said revenue from equities trading rose 48% to a record high, while Morgan Stanley reported a 45% jump.

“The animal spirits are still there, insofar as folks are trying to not get caught offside," Morgan Stanley CEO Ted Pick said during a call with analysts last week.

Banks noted activity in equity derivatives was especially high in the first quarter, as investors braced for volatility. Goldman’s finance chief Denis Coleman said the firm continued to see “significant demand" for financing from its markets clients.

Too much volatility for too long could become a problem for the banks, because it could spur clients to sit on the sidelines entirely. But, so far, bankers say the market hasn’t been showing signs of panic.

“What we’ve heard from our markets colleagues is that that’s actually functioning quite smoothly," JPMorgan Finance Chief Jeremy Barnum said last week.

Bank of New York Mellon’s CEO Robin Vince also said the trading his bank has seen isn’t clients liquidating positions, which would signal they are leaving the markets. Vince told analysts on Friday that “a lot of the activity has been de-levering by people who’ve been raising cash to pay back lines, not raising cash just to have more dry powder on the sidelines."

Bankers said the volatility forced them to ask hedge-fund clients for more collateral to be posted, in some cases hundreds of millions of dollars. But even there, the bankers say the clients have been able to provide the funds and haven’t been slowing their activities.

On Tuesday, investors will get another look at how banks are faring when Bank of America and Citigroup report earnings.

Solomon said clients are concerned about what is in store for the near and long-term, which has constrained their ability to make important decisions. That has weighed on investment banking broadly.

Still, Goldman said its backlog of deals is up on a quarter-over-quarter basis, and other banks said they anticipated a rebound later. A top Goldman banker said a slowdown in headlines that reset global trade would be needed.

Through the weekend, Goldman bankers held calls with company CEOs to brainstorm how much market stability would be needed before initial public offerings and other deals could proceed.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com