Trade Barriers: A Double-Edged Sword

European Central Bank policymaker Fabio Panetta warns against blanket trade barriers, aligning with U.S. President Trump's tariff policies. Panetta suggests such measures could harm global welfare, inflation, and economic output, creating supply chain vulnerabilities and circumventive trade routes while failing their protective intent.

European Central Bank policymaker Fabio Panetta cautioned against the use of blanket trade barriers, highlighting potential negative consequences coinciding with U.S. President Trump's tariff plans.

In Rome, Panetta, who also serves as the governor of the Bank of Italy, compared such measures to a kitchen knife, unsuited for the intricate task of global economic management. Trump's proposed tariffs, including a 10% universal rate and 60% on imports from China, may significantly impact the global market.

Panetta emphasized the risk of global division into competing blocs, harming output, inflation, and welfare. He noted that while protectionism might seem effective, it could be undermined as targeted products find alternative trade routes, thereby failing to offer true economic protection.

(With inputs from agencies.)