Andrew Bailey, Governor of the Bank of England, has issued a plea for prioritising free trade and openness as Donald Trump’s re-election looks set to usher in a new era of economic protectionism.
In his Mansion House speech this evening, Bailey owned up to being an “old-fashioned free trader at heart”.
“Amidst the important need to be alert to threats to economic security, let’s please remember the importance of openness,” he said. “It’s a British characteristic, I like to think.”
He argued openness was an “important determinant of productivity”, while suggesting that the trade barriers that resulted from Brexit had “weighed on the level of potential supply”.
“There is nothing new about saying this, just to be clear,” he added.
Bailey’s comments come just a week after the re-election of Donald Trump, who has pledged to implement a range of tariffs in a bid to support and protect American industry.
In the election campaign, Trump claimed that “tariff is the most beautiful word in the dictionary”.
He has threatened to impose a tariff of up 20 per cent on all foreign imports, rising to 60 per cent for imports coming from China.
Economists fear this could cause enormous damage to the global economy, particularly if other jurisdictions follow through on their threats to impose retaliatory tariffs.
Projections from the International Monetary Fund (IMF) suggest the global economy could shrink by as much as seven per cent in the event of a global trade war.
“Seven per cent is basically losing the French and German economies. That’s the size of the loss that would be,” Gita Gopinath, first deputy managing director at the IMF, told the BBC last month.
Greater trade helps to improve economic welfare in a number of different ways, including by increasing the choice of products available to consumers and boosting the level of productivity.
Speaking over the weekend, Darren Jones, chief secretary to the Treasury, said officials in the UK would be considering “lots of different scenarios” after Trump’s re-election.
“The position of the government is that we support free trade and we support the trading relationship between the United States and the United Kingdom,” he said.