Bank of England Warns of Tariffs Threat to Stability of Global Financial System

By Paul Hannon

The Bank of England Wednesday warned that rising tariffs threaten to undermine the stability of the global financial system, and said further sharp falls in asset prices are likely.

The prices of a wide range of assets have fallen sharply since U.S. President Trump announced a new round of tariff increases on April 2, with Treasury bonds the most recent to have big declines.

In a statement following meetings on Friday and Tuesday, before the big drop in bond prices, the BOE's Financial Policy Committee said global economic growth is likely to slow as the higher tariffs are implemented, a development that would "harm financial stability."

"The probability of adverse events, and the potential severity of their impact, has risen," the FPC said.

The FPC said that markets have continued to function in an orderly fashion as investors adjust to the changes in trade policy. But further adjustments to changes in trade policy are probable.

"Notwithstanding these falls in asset prices, the risk of further sharp corrections remains high," the FPC said.

Write to Paul Hannon at paul.hannon@wsj.com