World Economy

Fed Chief Casts Doubt on Trump’s Policies

Federal Reserve Board Chairman Jerome Powell speaks during a hearing before the Senate Banking, Housing and Urban Affairs Committee.Federal Reserve Board Chairman Jerome Powell speaks during a hearing before the Senate Banking, Housing and Urban Affairs Committee.

US Federal Reserve Chairman Jerome Powell said protectionism can hurt economic growth and potentially undermine wages, just as the US ratchets up trade tensions with commercial rivals as well as longstanding allies.

Testifying Tuesday before a senate banking committee, Powell was responding to lawmaker questions about the economic impact of President Donald Trump’s tariffs, Bloomberg reported.

“In general, countries that have remained open to trade, that haven’t erected barriers including tariffs, have grown faster. They’ve had higher incomes, higher productivity,” he said. “Countries that have gone in a more protectionist direction have done worse.”

The fed chairman also said concerns about trade policy “may well” have an impact on wages and capital expenditures, which are known as capex. “We don’t see it in the numbers yet, but we’ve heard a rising chorus of concern which now begins to speak of actual capex plans being put on ice for the time being,” he said.

 Global Growth

Powell’s comments come as an increasing number of economists and policymakers warn that trade tensions threaten to undermine global growth. The International Monetary Fund on Monday said world output could drop by about 0.5% below its projected level by 2020 if threatened trade barriers become reality. The US economy would be “especially vulnerable” because it would be the focus of retaliation in a tit-for-tat conflict, the fund’s chief economist Maurice Obstfeld said.

Powell was more circumspect in his opening statement on the topic of trade, saying only that it’s “difficult to predict’’ how tensions will shape the economic outlook.

Senators of both parties during the question-and-answer session tried to draw the fed chairman into the political debate by pressing him on trade.

Powell was careful not to specifically criticize Trump’s policies, which are designed to pressure partners to reduce barriers against American goods. The White House in recent months has slapped duties on shipments of high-tech goods from China as well as steel and aluminum from most of its trading partners.

Asked whether he viewed the European Union as an economic foe of the US, Powell said “no, I do not.” Trump said earlier this month he sees the bloc as an adversary on trade.

In an interview with CBS Evening News early in the week, Trump said: “Well, I think we have a lot of foes. I think the European Union is a foe, what they do to us in trade. Russia is foe in certain respects. China is a foe economically.…”

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