Jose Barroso Says ‘Naked and Ugly Protectionism’ Must Be Countered

(Bloomberg) -- The threat of an escalating trade war between the U.S. and China is the biggest risk to the global economic outlook, Goldman Sachs Group Inc. adviser and former European Commission president Jose Barroso said, warning that “the spiral of naked and ugly protectionism” needs to be countered.

“Probably the biggest risk we have today for the global economy is trade protectionism, not only because of the direct impact on trade but because of business confidence generally,” Barroso said in an interview with Bloomberg Television on Monday. “I know that some investments are now on hold and of course when investments are on hold that is detrimental for growth and jobs.”

China said it is prepared for a “protracted war” with the U.S. over trade, according to an editorial in the nationalist Global Times on Sunday. That followed the release on Friday of a tariff list designed to retaliate against the U.S. threat to impose new duties on $200 billion of Chinese imports.

“It’s not difficult to predict that there will be tit-for-tat kinds of reactions,” Barroso said. “I’m sure China will react to any tariffs the United States introduces,” he said.

“The rhetoric should not be for protectionism, but asking China to open more,” Barroso said. “That is the right thing to do. We need to come closer to a level playing field.”

Barroso said global economies should continue to engage with the Trump administration in the U.S. “Let’s try to avoid the spiral of naked and ugly protectionism,” he said.

‘Dark Cloud’

Barroso said the trade friction threatens to undermine a period of widespread economic growth. “We have an exceptional situation of simultaneous growth globally, but there is now a very dark cloud over this in the rise of protectionism and the detrimental impact that can have on investment confidence,” he said.

“Trying to delegitimize the global institutions of trade, the multilateral order of trade, WTO, its system, its rules -- I don’t think it’s helpful,” Barroso said. “It’s creating a lot of doubts and uncertainty.”

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