Global trade fragmentation comes with big output losses: ECB warns
Philip R. Lane Chief Economist, European Central Bank talks to Balazs Koranyi, Chief Correspondent, Reuters (not pictured) at the London Stock Exchange, London, Britain, June 17, 2024. Photo: REUTERS/Anna Gordon/File Photo
Global trade fragmentation due to protectionist measures entails sizeable output losses for all countries involved, European Central Bank chief economist Philip Lane said on Friday, just as the incoming US administration considers imposing fresh tariffs.
"Avoid broad-based protectionism because while resilience is a legitimate concern, a tit-for-tat trade war is welfare reducing and does not fully eliminate interdependencies," Lane said in presentation slides for a speech.
Trade fragmentation will matter for central banks and monetary policy because it causes larger, more frequent supply shocks during the transition period while over the longer run, reduced trade diversification increases volatility and inflation, he said.
Keep updated, follow The Business Standard's Google news channel
