MNI: Powell Excerpt: Trade War Effects

     WASHINGTON (MN) - The following is a response of Federal Reserve Chairman

Jerome Powell to a question from a reporter at his press conference following

Wednesday's Federal Open Market Committee meeting.

     Question: The researchers at the European central bank put out a paper

saying that the impact of the trade war could be dire. That the U.S. economy

could drop by 2% in the first year after a widespread trade war. Could you talk

about the discussion you had, your policy statement doesn't mention the trade

tensions. You did not mention them. What kind of outlook do you have right now

for the trade war?

     Powell:  I guess I need to start by saying that we're not responsible for

trade policy, and we don't comment on particular, you know, trade actions and

that sort of thing, but you will have seen that we have this very extensive

network of business contacts around the country through the reserve banks

largely, and we've been hearing a rising chorus of concerns from businesses all

over the country about disruption of supply chains, materials, cost increases,

and loss of markets and things like that. We've been hearing quite a lot of

that, and we -- the reserve bank presidents talk about it in the meeting, and it

goes in the minutes. We're very transparent about hearing all that. I think if

you look at the aggregate -- the performance of the U.S. economy at an aggregate

at a national level it's hard to see much happening at this point. You can look

at it the other way. You can ask if all of the tariffs that have been announced

are applied, what would be the effect at the aggregate level, and they're still

relatively small. 

     You know, we worry about a couple of things. One is loss of business

confidence, and that can reduce investment. We don't see effects we can measure

yet. Also the financial market reaction over time to unexpected trade

developments. 

     More than anything, though, I would worry in the longer run where this is

going. If the end place we get to is lower tariffs, that would be good. Trade

generally supports productivity and supports higher incomes, and, you know, fair

trade under internationally accepted rules can be a good thing. I think if this

perhaps inadvertently goes to a place where we have widespread tariffs that

remain in place for a long time, a more protectionist world, that's going to be

bad for the United States economy and for American workers and families and also

for other economies.

--MNI Washington Bureau; +1 (973) 494-2611; email: harrison.clarke@marketnews.com

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