Australia's Lowe warns Trump tariffs could shock global economy

SYDNEY – Australian central bank Governor Philip Lowe slammed President Donald Trump’s tariffs proposal, warning escalation and retaliation could develop into a “very big shock for the global economy.”

In unusually strong language for the Reserve Bank of Australia chief, Lowe described Trump’s proposed tariffs on imported steel and aluminium as “highly regrettable and bad policy". He urged other nations not to retaliate, saying the protection is “not a positive, but it’s manageable” for the world economy if only restricted to the two industries.

“The best thing to do is just to sit still and do nothing,” the governor said in response to questions after a speech in Sydney Wednesday. “That’s the hardest thing to do in some cases, because there’s a political imperative in some countries to kind of respond to what is seen as an unjust action.”

Around the time of Lowe’s comments, Trump’s top economic adviser, Gary Cohn, announced he was quitting. The director of the National Economic Council had furiously lobbied against Trump’s protection plans, which risk retaliation from both allies and major trading partners like China. The European Union is already preparing punitive tariffs on iconic US brands produced in key Republican constituencies.

'NOT RIGHT'
“History’s very clear here: protectionism is costly,” Lowe said. “It’s costly to the country that implements the protectionism, it’s costly to everyone else. It’s just not the right thing to do.”

“We’ve been down that route before, many other countries have been down that route and I don’t know a single country that’s built sustainable comparative advantage and growth through protectionism,” he said. “The evidence is exactly the reverse.”

Meanwhile, the Trump administration is considering clamping down on Chinese investments in the US and imposing tariffs on a broad range of its imports to punish Beijing for its alleged theft of intellectual property, according to people familiar with the matter.

Australian Prime Minister Malcolm Turnbull on Wednesday similarly urged major economies to refrain from retaliatory measures over the tariffs.

“A trade war is a race to the bottom that makes us all poorer,” he said. “Our future lies in open markets and in a rules-based trading system that allows countries to compete on a level playing field.”