Protectionist policies by the incoming US administration will hamper global growth and Europe must be better prepared from 2018, European Central Bank (ECB) policymakers warned on Tuesday, Reuters reports.
US President-elect Donald Trump has promised a big increase in trade barriers, including a universal 10% tariff on imports from all foreign countries and a 60% tariff on imports from China, aimed at reducing the US trade deficit.
Harmful consequences
“What we do know is that the significant import tariffs being talked about could have damaging consequences for the global economy,” Finland’s central bank chief Olli Rehn said in London. “A new trade war is the last thing we need amid today’s geopolitical rivalries – especially between allies.”
Austrian central bank chief Robert Holzmann warned that these policies, if implemented, would keep US interest rates and inflation higher, also putting upward pressure on prices elsewhere.
“He means what he said and will probably implement it sooner than we expect. If so, what do the markets expect? … That interest rates will stay higher and that inflation will also be higher,” Robert Holzmann said in Vienna, adding that it would put upward pressure on dollar and euro zone inflation.
The governor of the Austrian central bank also argued that if the dollar stabilizes and approaches parity against the euro, this would have a measurable impact on import costs, especially for energy, making it harder for the ECB to reach its 2% inflation target and possibly delaying the process.
Preparation
Trade tensions began to rise between the US and Europe during Trump’s first presidency and Europe struggled to find a common response, a mistake it should not make this time, Finland’s central bank chief Oli said Wren.
“If a trade war starts, Europe should not be unprepared, as it was in 2018,” added O. Wren.
“(EKT) must, within its mandate, act as an anchor for economic and financial stability in this landscape of great challenges,” O. Ren said. “No one should doubt that we will fully shoulder this responsibility.”
Source: ot.gr
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