Protectionism is a “major risk” to the global recovery now underway, said Jacob Frenkel, chairman of J.P. Morgan Chase International.
And he warned those protectionist practices, like rising trade tariffs, are becoming a slippery slope.
“The two large countries — United States and China — are engaged in either a loud vocal negotiation or maybe the beginning of skirmishes of [a] trade war,” Frenkel said in an interview with CNBC’s Sara Eisen on “Power Lunch.”
“We know one thing. A trade war will be extremely dangerous for the world economy and once it slides it will be very difficult to turn it around,” he said.
Tensions have been escalating between the U.S. and China after President Donald Trump signed an executive memorandum in March that would impose tariffs on up to $60 billion in Chinese imports. China then announced its own list of U.S. goods to tax and Trump quickly responded by asking U.S. Trade Representative Robert Lighthizer to consider $100 billion in additional tariffs against China.
Frenkel said there’s a lesson to be learned from the global tariffs imposed in the 1930s, which exacerbated the Great Depression. The Senate website calls the plan, known as the Smoot-Hawley Tariff, “among the most catastrophic acts in congressional history.”
Frenkel said, “With the best intention, unintended consequences can be disastrous. In the trade area, even more so.”
And these days, the United States is much more integrated into the world economy, he noted.
“It is an experiment that is too expensive,” he said.
Federal Reserve Governor Lael Brainard also believes the escalation of trade tensions could raise concerns about the global economic recovery.
“Right now, it’s very hard to say how current discussions might evolve … but if we saw broadening and retaliatory measures spreading, that could dent global confidence,” she said on “Power Lunch.” “It could disrupt global supply chains, so it’s certainly a material uncertainty to the outlook.”
— CNBC’s Fred Imbert contributed to this report.
