FRANKFURT AM MAIN: European Central Bank vice president Vitor Constancio on Monday warned that the protectionist measures promised by US president-elect Donald Trump risked weakening global growth.
The world economy is currently facing an “abnormal degree of uncertainty” Constancio said at a conference in Frankfurt, adding that the initially favourable reaction on financial markets to Trump’s shock victory may be shortlived.
“The markets’ perception that the US is embarking into a new phase of expansionary budgetary policy has lifted optimism,” he said, in a nod to Trump’s pledges to cut taxes and boost spending.
“So far, those developments point to a US rise in economic growth, but in the context of an ‘America first’ policy,” he warned, adding that for the rest of the world the “real negative effects” could come later.
Trump was elected last week on an overtly protectionist platform, promising to scrap international trade deals and railing against jobs and factories being sent abroad.
The ECB’s Constancio said rising protectionism in the US could translate into a lower demand for imports, harming export nations.
“World trade, already quite weak, may continue to collapse, hurting all open economies dependent on exports,” Constancio said, warning that emerging economies were particularly vulnerable to changes in international trade.
Constancio and the other members of the ECB’s governing council are due to hold their next monetary policy meeting in Frankfurt on December 8.
Given the eurozone’s sluggish recovery and stubbornly low inflation, the bank is widely expected to announce additional stimulus measures, with investors betting on an extension of its massive bond-buying programme beyond the March deadline.