Stanley Fischer: Trump doesn't understand international trade

Studies suggest president’s tariffs will cost US households up to $1,000 a year.

Stanley Fischer (photo credit: EYAL YITZHAR/GLOBES)
Stanley Fischer
(photo credit: EYAL YITZHAR/GLOBES)

Former Bank of Israel governor and former Federal Reserve vice chairman Stanley Fischer launched a stinging attack on US President Donald Trump’s trade policies on Sunday night, accusing him of failing to understand trade and interfering with the Fed’s decision-making process.

“The problem with Trump’s approach to trade is that he doesn’t understand trade,” Fischer told the Globes Governors Conference in Tel Aviv. “He doesn’t understand that there are positive-sum games; that the two sides profit if they have the awareness and the ability to conduct negotiations. Trump doesn’t understand, he simply doesn’t understand – and if he does understand, then he succeeds in hiding this fact.”
Fischer, who concluded his term as vice chairman of the Fed in October 2017, said that “almost every day” US actions in the escalating trade war with China weaken the global system of trade and international relations.
“It causes a lot of damage to the global economy, which is the economy of all countries,” said Fischer. “It is almost unbearable and things are deteriorating all the time. I’m very worried by it.”
The 75-year-old Israeli-American economist – who served as Bank of Israel governor from 2005 to 2013 – also accused Trump of interfering in the Fed’s benchmark interest rate hikes in 2018. On four occasions, America’s central bank decided to increase interest rates by 0.25%.
“I’m almost sure that if Trump wouldn’t have interfered, the Fed would not have raised the interest rate,” Fischer said. “Trump made them say: ‘How can we prove we don’t accept his orders?’ That’s a big part of our problems – the Fed is a professional, serious place, with excellent economists.”
On Sunday, Washington slapped 15% tariffs on a variety of Chinese goods – including footwear, smart watches and flat-panel televisions – while Beijing imposed new duties on US crude, the latest escalation in a bruising trade war.
Several studies suggest the tariffs will cost US households up to $1,000 a year, with the latest round hitting a significant number of US consumer goods.
In retaliation, China started to impose additional tariffs on some of the US goods on a $75 billion target list. Beijing did not specify the value of the goods that face the higher tariffs.
Although Trump has said that the two countries will hold talks in September, there are doubts any such talks would lead to a breakthrough.
“So far, Trump appears defiant on the tariff hikes, blaming the Fed and American companies for their difficulties in dealing with the tariffs,” said Shane Oliver, chief economist at AMP in Sydney. “There is a long way to go though, and re-establishing trust will be difficult after the experience since [the middle of] last year. Share markets may still have to fall further to pressure Trump to resolve the issue.”