Trump’s trade tariffs would threaten economic growth, Bank of England’s Lombardelli warns – business live
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A day after Donald Trump announced plans for fresh tariffs on Canada, Mexico and China, policymakers around the world are digesting the consequences of “Tariff Man” Trump returning to the White House.
A deputy governor at the Bank of England, Clare Lombardelli, has warned that the president-elect’s proposed trade tariff would pose a risk to economic growth in countries including the UK.
Speaking to the Financial Times, Lombardelli explained that Trump’s trade policies could hit growth in the short term, while long-term productivity also suffers from increased trade frictions.
She says:
“I don’t want to speculate on the specifics but we know barriers to trade are not a good thing, whether they are tariffs or regulatory or others.
“Whether you are an economic historian, an economic theorist or a data-driven economist, the impact is clear in terms of its direction. In terms of its size, that depends on the circumstances.”
Trump rattled the financial markets yesterday by announcing he would impose 25% tariffs on Canada and Mexico, and an extra 10% on China, in a crackdown on immigration and drugs.
Trade experts fear that Trump could spark a global trade war, if other countries retaliate with their own tariffs in response.
Keith Rockwell, a former director at the World Trade Organization, explained:
“The United States exports hundreds of billions of dollars worth of goods to these countries. Anyone who expects that they will stand pat and not retaliate has not been paying attention.”
Trump’s proposed tariffs are likely to push up inflation in the US, as importers will pass the higher costs onto consumers – and possibly add a bit more on top!
But they could have a deflationary impact on other countries; China, for example, could reroute shipments to Europe rather than the US, cutting prices to support its sales.
They also pose a political dilemma for the UK – should it try to align with the US, to avoid being hit by tariffs too, or try to get closer to the EU?
Simon Sutcliffe, Customs & Excise Duty Partner at accountancy firm Blick Rothenberg, says the US hasn’t considered such a protectionist trade policy since the 1930s with the Smoot-Hawley Act – which ended up fuelling the Great Depression.
Sutcliffe says Sir Keir Starmer faces a dilemma:
One of the biggest stumbling blocks in the UK’s trading relationship with the EU is the control and administration surrounding the movement of food products. Moving closer to the EU may allow development of a consistent and streamlined food policy which would reduce trade red tape and extra charges.”
“However, aligning with the US would undermine that attempt, as the EU would be exceptionally resistant to allow US originating food products to ‘seep’ into its marketplace, resulting in the administrative burden on food movements being cemented in for longer.”
“But ‘Refusing’ the US may result in UK exporters being subject to US tariffs on their products. The US is the largest individual trading partner of the UK trading with roughly 30% of our total exports going to the US and the US exporting 10% of its goods to the UK, so any tariffs would have a big impact on UK trade.”
Also coming up today
We’ll get a full-body health check on the US economy today, with a flurry of economic data – from GDP to trade and jobless claims – being rushed out ahead of the Thanksgiving holiday tomorrow.
The agenda
9.30am GMT: GfK survey of German consumer confidence
Noon GMT: US weekly mortgage approvals data
1.30pm GMT: US Q3 GDP report (second reading)
1.30pm GMT: US durable goods orders for October
1.30pm GMT: US weekly jobless claims data
1.30pm GMT: US trade balance for October
3pm GMT: US PCE inflation measure for October