Mon, May 20, 2019 - Page 16 News List

Fed’s Kaplan downbeat on trade dispute

WATCHING AND WAITING:The US Federal Reserve Bank of Dallas president said the US-China trade spat is likely to slow global growth and, eventually, US growth

Bloomberg

US Federal Reserve Bank of Dallas President Robert Kaplan has said that trade tensions might have a chilling effect on the US and global economy, and he is also watching for the potential effects on inflation.

Some end-markets might be jeopardized by the US-China trade dispute, but “the bigger thing is logistics and supply chain arrangements,” Kaplan said on Saturday during a wide-ranging discussion at the Society for Advancing Business Editing and Writing’s annual conference in Phoenix.

“It’s more likely to slow global growth” and “it’s more likely to slow US growth ultimately,” but it is also possible some of the threatened tariffs might not be enacted, he said.

US President Donald Trump last week increased duties to 25 percent from 10 percent on about US$200 billion in Chinese products and has threatened to impose tariffs on almost all imports from the world’s No. 2 economy. That would pull in consumer products such as mobile phones and toys that so far have not been affected, as well as everything from flashlights to billiard balls.

As for the effects of tariffs on inflation, it is “too soon to judge, you’ll have to see the currency reaction and how businesses deal with it,” said Kaplan, who does not vote on monetary policy this year.

He said that the Fed would have to examine, “is this transitory, or is this something that will be more persistent?”

The US-China trade dispute is to dominate the world economy headlines this week as Trump and Chinese President Xi Jinping (習近平) go toe to toe.

Their clash is casting a pall over the world economy as investors, businesses and consumers risk retrenching staff until the outlook is clearer.

“Darkening trade war clouds loom over the financial landscape,” Bloomberg Economics’ Carl Riccadonna, Yelena Shulyatyeva and Eliza Winger said. “Auto tariffs have been delayed, at least for now, suggesting that the Trump administration is aiming to avoid escalating a multi-front trade conflict.”

The ripple effect of the US-China trade dispute could trigger imported inflation in the US and lead the Fed to raise its key interest rates in the second half of the year, Taiwan Institute of Economic Research (台灣經濟研究院) president Chang Chien-yi (張建一) said on Wednesday on the sidelines of a forum in Taipei focusing on the economic outlook in Asia.

Higher interest rates in the US would raise the value of the US dollar, which would in turn prompt investors to move their funds out of non-greenback denominated assets, including the New Taiwan dollar, Chang said.

Due to the escalating trade tensions between the world’s two biggest economies, the Asian region and the rest of the world is at risk, he added.

Additional reporting by CNA

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