WASHINGTON — The leaders of the central banks of four major economies expressed alarm Wednesday that multiple trade conflicts are threatening to slow global growth.
The officials said at a conference in Portugal that the escalating trade fights involving the United States, China and Europe could erode business confidence, lead companies to delay investment and hurt the global economy. The central bank leaders added, though, that so far there’s scant evidence that this has happened yet.
“What’s the effect on confidence?” European Central Bank President Mario Draghi said. “What’s the effect on business investment? There are lessons from the past, and they are all very negative.”
Federal Reserve Chairman Jerome Powell, speaking at the same conference, noted that the Fed has heard of businesses postponing investment and hiring, and “those concerns seem to be rising.” But Powell repeated a point he made at a news conference last week that so far, these are only anecdotal reports and that economic data have yet to show that the threatened tariffs have slowed growth.
The Trump administration has imposed tariffs on steel and aluminum and has said it will impose duties on $34 billion of Chinese imports July 6, to be followed later by tariffs on an additional $16 billion of Chinese goods. The Trump administration has also pushed to renegotiate NAFTA with Canada and Mexico. But those talks have stalled.
Philip Lowe, head of the Reserve Bank of Australia, said the tariffs could ultimately harm the global economy by causing stock markets to tank and companies to delay investment.
“It wouldn’t take much for the financial markets falling, combined with businesses waiting to turn this into a very big global event,” Lowe said. “What’s happening is very disturbing. Can anyone think of a country that’s made itself wealthier or more productive by building walls?”
Haruhiko Kuroda, head of the Bank of Japan, warned that the trade battles could disrupt supply chains in Southeast Asia. Those supply networks send components into China for assembly into goods that are then shipped to the United States.
“I hope that this escalation could be ended,” Kuroda said. “This is a matter of great concern for Japan.”