ECB's Weidmann Takes Sideswipe at Trump’s ‘Mistaken’ Trade Policy
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European Central Bank policy maker Jens Weidmann took an unsubtle swipe at U.S. President Donald Trump’s trade strategy, without explicitly mentioning his name, saying his higher-tariff approach is wrong.
“Proponents believe that higher tariffs can solve several problems at once: they claim that raising tariffs can reduce current account deficits, protect jobs, and even make people better off,” he said Wednesday, speaking in New York. “This belief is mistaken.”
Taking the example of the U.S.-China trade conflict, Weidmann cited Bundesbank simulations that showed the spat could cut the output of both countries by more than a half a percent over the medium term, and slash world trade by 1.5%. Potential adverse effects might be “considerably larger” in a spat between the U.S. and Europe.
“In this situation, central banks aiming for price stability have to act if the inflation outlook is affected,” he said. “Beyond that, I find it worrying when trade policy debates become entangled with monetary issues.”
Weidmann, who heads Germany’s Bundesbank, rejected Trump’s accusations that the ECB was attempting to depreciate the euro against the dollar.
“As far as I can see, no major economy is currently engaging in strategic competitive devaluations, far less in a currency war,” he said.
While Draghi continues to call for fiscal policy to bolster the euro zone’s struggling economy, Weidmann remained skeptical about its necessity in Germany.
“In the short term, some additional fiscal spending might be possible,” he said. “However, with respect to macroeconomic stabilization, any further stimulus appears unnecessary, unless a perceptible deterioration in the economic outlook becomes apparent” -- a scenario he argues is not currently in the projections.
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