FRANKFURT (Reuters) – 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 U.S. 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.
(Reporting by Balazs Koranyi; Editing by Hugh Lawson)
