“Trump’s tariffs will shake global trade” - Bank for International Settlements warns of economic consequences
The world's leading central bank group, the Bank for International Settlements, has issued its first public warning about the risks posed by US President Donald Trump's trade war.
Bank head Agustin Carstens said trade developments are an obvious concern, while fiscal policy, immigration policy and the broader geopolitical backdrop carry major question marks.
“Such policy uncertainty will affect central banks in several ways,” said Carstens, who was previously governor of the Bank of Mexico. Economic growth is likely to suffer, he said, as companies postpone investment and households postpone large purchases. Financial markets are also expected to be more volatile, given the significant fluctuations in currency and asset markets.
"Some of these asset price movements could be inflationary," Carstens said, urging central banks to keep inflation under control.
The Bank for International Settlements is a forum for the world's top central banks, helping to manage their foreign exchange reserves.
Trump's reelection has threatened to shatter the global consensus on financial regulations, causing concerns, particularly in Europe.
Carstens also warned of loose fiscal policies and a possible further increase in debt, which typically fuels inflation and protects currencies. There is also the risk of a widening divergence between interest rates in the US and those of other major economies.
"Economic growth in the United States has been much stronger than in the rest of the world recently. If this continues, we could see greater variability in central bank policy settings, with downstream effects on capital flows, exchange rates and global financial conditions," Carstens said.
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