You are here
Carney warns about trade war fallout on global growth
[LONDON] A global trade war at risk of escalating may already be slowing world economic growth, Bank of England governor Mark Carney warned in a speech on Thursday.
Mr Carney spoke as the US was Friday set to begin enforcing tariffs on more than US$34 billion in Chinese imports.
“There are some tentative signs that this more hostile and uncertain trading environment may be dampening activity,” Mr Carney said in a speech titled From Protectionism to Prosperity delivered in Newcastle, northeastern England.
“For example, survey measures of global export orders and manufacturing output have fallen back from highs at the start of this year,” added Canadian national Carney, whose own country is embroiled in a cross-border trade war with the US.
The BoE in addition forecast that further escalation in the trade war, or ten-percentage point rise in tariffs between the US and all of its trading partners could erase 2.5 per cent off US output and one per cent off global economic output.
“Protectionism affects the real economy through three channels,” Mr Carney said. “There are direct effects, through reduced trade flows, disrupted supply chains and higher import costs. And there are indirect effects, via business and consumer confidence and financial conditions".
“If implemented, the tariffs announced thus far (between the US and China, the US and EU, and the US and its NAFTA partners, as well as the potential US tariffs on EU motor vehicles and parts), will broadly double average bilateral tariff rates, and could raise average US tariffs to rates not seen in over 50 years,” Mr Carney argued.