President Donald Trump’s steadfast push for protectionist trade will lead the U.S. economy to a “dead end,” a top Federal Reserve Bank official said Thursday in a speech thrashing Trump’s trade agenda, even if his policies score political points in the short term.
“There are many approaches to dealing with the costs of globalization, but protectionism is a dead end,” William Dudley, New York Federal Reserve Bank president and CEO, said at the Bombay Stock Exchange. “Trying to achieve a high standard of living by following a policy of economic isolationism will fail.”
Dudley is a close confidant of Fed Chairwoman Janet Yellen.
Protectionism is intriguing to those who feel like they have been left out of the economy, drawing in people with its “siren-like appeal,” Dudley said. Protectionism can even work to provide some “potentially rewarding to particular segments of the economy in the short term.” But he laid out an argument highlighting the benefits of free trade and open borders have on the economy. He said instituting trade barriers would not only hurt the U.S. economy, but also work to retard global economic growth.
Dudley said the long term implications trade barriers pose for economic growth are a net-negative. “Viewed more broadly, it would almost certainly be destructive to the economy overall in the long term,” he said.
Trump has promised to push for an “America First” economic agenda, one characterized by exiting international trade deals, such as the North American Free Trade Agreement, and securing U.S. borders to protect American jobs.
The Fed has raised interest rates twice since Trump took office and expects to raise rates at least two more times to push the economy towards its goal of 2 percent economic growth.
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