What central bankers say about Trump’s trade war threat

Bloomberg

Central bankers around the world are grappling with the prospect of a global trade war sparked by US President Donald Trump’s plan to slap tariffs of 25 percent on steel imports and 10 percent on aluminum. Here are extracts of some of the recent comments by central bank officials:

AUSTRALIA
Reserve Bank of Australia Governor Philip Lowe, whose economy is the most China-dependent in the developed world, said that Trump’s move was “highly regrettable and bad policy.” “If it’s just confined to the current higher tariffs on steel and aluminum, then I think it’s manageable for the world economy. It’s not a positive, but it’s manageable,” he said. “This could turn very badly though if it escalates. If we see retaliation and a counter retaliation, this could turn into a very big shock for the global economy.” “History’s very clear here: protectionism is costly. It’s costly to the country that implements the protectionism, it’s costly to everyone else. It’s just not the right thing to do.”
US
Federal Reserve Bank of Dallas President Robert Kaplan, speaking with reporters on the sidelines of an energy conference in Houston, said it’s too soon to comment on the potential economic impact of the tariffs. “Global trade is good for the US economy, and our trading relationships with Canada and Mexico we believe are very critical to US competitiveness,” he said. Federal Reserve Governor Lael Brainard, one of the central bank’s most ardent doves, said it was too early to say if the possibility of a trade war could disrupt her outlook. “We would take into account developments if they proved to be material to the outlook,” she said.

SWEDEN
Stefan Ingves, governor at the Riksbank, said it’s too early now to say what it would mean for the central bank’s forecast while signaling concern about a deepening dispute. “It’s one thing to discuss higher tariffs on steel and aluminum, but if it turns into a general discussion around how different countries try to protect themselves, then it can never be good for the global economy and it would definitely not be good for the Swedish economy,” Ingves said after a speech in Stockholm.

THAILAND
Don Nakornthab, a senior director at the Bank of Thailand, said a trade war is now the biggest risk for the central bank. Exports of goods and services make up about 70 percent of the Southeast Asian economy. “Trade politics is the most important risk for our economy as it can evolve into trade war,” Don said in an interview in Bangkok. “If there’s an external shock in the near future, our economy may face a difficult time.” Thailand’s trade surplus with the US exceeded $20 billion last year. The economy is in the early stages of an upswing and has been lucky to be able to “rely on external demand while we wait for local demand to gain more strength,” he said.

THE PHILIPPINES
Central bank Governor Nestor Espenilla said a trade war may result in slower global growth, which could hurt inflows from the more than 10mn Filipino workers who live and work abroad. Remittances amount to 10% of GDP and are key source of foreign income in the nation.

MALAYSIA
The central bank noted in its monetary policy statement that trade tensions have risen recently, but “at this point, risks to the global growth outlook remain balanced, pointing towards continuity in global economic expansion.”

HUNGARY
National Bank of Hungary Governor Gyorgy Matolcsy said the country needs to prepare for a sharp turn in global economic conditions, including the end of the cheap money era. There’s a “bellicose scenario” emerging in trade, exchange rates and the interest-rate environment, he said at a conference in Budapest.

CANADA
The Bank of Canada kept borrowing costs on hold, citing recent developments in trade policy that have become “an important and growing source of uncertainty” for the global and Canadian economic outlooks. While the bank has been highlighting risks to NAFTA for months, the latest language suggests those concerns have evolved.

ECB
ECB President Draghi added his voice to those criticising the US threat to slap import tariffs on some products and called on governments to work together rather than end up in a tit-for-tat dispute.