What Central Bankers Are Saying About Trump's Trade War Threat

(Bloomberg) -- Central bankers around the world are grappling with the prospect of a global trade war sparked by U.S. 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:


  • Reserve Bank of Australia Governor Philip Lowe, whose economy is the most China-dependent in the developed world, said on March 7 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.”
  • “So the best thing for everyone to do, perhaps even the hardest thing to do, but the best thing to do is just to sit still and do nothing, to not respond and to continue advocating for open trade.”


  • 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 U.S. economy, and our trading relationships with Canada and Mexico we believe are very critical to U.S. competitiveness,” he said.
  • Federal Reserve Governor Lael Brainard, one of the central bank’s most ardent doves, said on March 6 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. “It’s early to tell what the broader implications could be, so I see it as an uncertainty, but not something that would materially change my outlook, today.”


  • 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 told reporters on March 6 after a speech in Stockholm.


  • 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 on March 6. “If there’s an external shock in the near future, our economy may face a difficult time.”
  • Thailand’s trade surplus with the U.S. 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 10 million Filipino workers who live and work abroad.
  • Remittances amount to about 10 percent of GDP and are key source of foreign income in the Southeast Asian nation.
  • “The risk of trade wars is the negative impact on the growth prospects of the global economy itself, affecting everyone, including those who start it,” Espenilla said in a mobile-phone message.
  • “The currency angle is but a small piece of the larger picture where there is less economic prosperity for all,” he said.


  • The central bank noted in its monetary policy statement on March 7 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.”


  • 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 on March 6.


  • The Bank of Canada kept borrowing costs on hold March 7, 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 central bank has been highlighting risks to the North American Free Trade Agreement for months, the latest language suggests those concerns have evolved. The March 7 statement didn’t even mention Nafta.


  • European Central Bank President Mario Draghi on March 8 added his voice to those criticizing the U.S. 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.
  • “If you put tariffs against what are your allies, one wonders who the enemies are,” Draghi told a regularly scheduled news conference in Frankfurt when asked about Trump’s plans.
  • “We are convinced that disputes should be discussed and resolved in a multilateral framework and unilateral decisions are dangerous,” Draghi said. The ECB chief also wondered aloud, “what’s going to be the response of the exchange rate?”


  • While the Swiss National Bank’s March 15 monetary policy statement didn’t mention protectionism, SNB President Thomas Jordan told Swiss public broadcaster SRF that there’s a “certain risk” of a trade war that could affect the central bank’s monetary policy.
  • “If international trade doesn’t work anymore, if a spanner gets thrown in the works, then that’s bad for everyone,” Jordan said. A drop in foreign demand would hurt the Swiss economy and weigh on inflation, he said. “Our monetary policy is very much affected by such developments.” Still, tit-for-tat reprisals in response to U.S. tariffs on steel and aluminum imports haven’t “materialized yet,” he said.


  • Being concerned about protectionism is “quite a common view these days,” when looking at Brexit, “major election decisions,” and the “new measures” from Trump as well as signals on countermeasures from other countries, Norges Bank Governor Oystein Olsen said on March 15. “If that development accelerates, it’s a worry.”

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