Countries espousing free trade in response to U.S. trade war threats should just drop all their own tariffs to zero — but they won’t, says St. Louis Federal Reserve Bank President James Bullard.
“The positioning here is that the other countries are all free trade and the U.S. is not. If that’s really what we’re saying then just drop all tariffs and all non-tariff barriers. Go down to zero. That would be better outcome for the whole world,” Bullard told CNBC’s “Squawk Box Europe” Monday.
“Why is that not going happen? Because they’re protecting their industries, that’s why it’s not going to happen. So, they’re protectionist.”
Markets have been on edge ever since President Donald Trump launched a trade conflict with China and allies in the EU, Canada and Mexico over what he deemed an unfair trade deficit between America and its trading partners. The U.S. and other countries have so far slapped new tariffs on $85 billion worth of goods, with Washington and Beijing threatening more.
The European Union currently imposes a 10 percent tariffs on U.S. auto imports, a target of Trump’s ire when he threatened in late June to levy a 25 percent tariff on European cars entering the American market. His meeting with European Commission President Jean-Claude Juncker on July 25 staved off the tariffs as the two outlined an approach toward a zero-tariff regime on a number of goods. Economists have said that tariffs on autos could pose the biggest threat to the U.S. economy.
Bullard, who oversees the Federal Reserve’s Eighth District and was named in 2014 as the seventh most influential economist in the world, stopped short of fully endorsing the U.S. president’s trade policies. But they may have have set countries on a more constructive path, he said.
“It’s controversial, that’s for sure. But I think the discussion should be focused on what’s the end state here,” Bullard, who is not currently a voting member of the central bank, said.
“The end state should be to reignite a global debate on trade — I think that has happened — and to think about where we want to get to. And where we want get to is very few or none in terms of tariff barriers or non-tariff barriers to trade.”
