WASHINGTON (Reuters) - The possibility of an escalating trade war between the United States and China will result in a bigger negative impact on the U.S. economy, St. Louis Fed President James Bullard said on Wednesday.
“In recent days we’re talking about more generalized tariffs between the U.S. and China, I think that is a more significant development,” Bullard told an audience of bankers in Little Rock, Arkansas.
If the spat had been restricted to steel and aluminum tariffs with exceptions on certain trade partners as previously outlined by the United States, it would not have had much effect at a macro-economic level, he said.
On Tuesday, President Donald Trump announced plans to impose tariffs on $50 billion in Chinese goods, resulting in swift retaliation from Beijing who proposed a list of similar duties on key U.S. imports including soybeans, planes, cars, beef and chemicals.
“I also think that the president has a lot of conviction on this issue and is determined to get better trade deals for the U.S….and that means a bumpy ride I think for all of us as these negotiations proceed,” Bullard said.
He added that he foresaw more stock market volatility and an impact on individual businesses as China targets particular sectors in the United States.
But Bullard also said that China had not been a fair player on trade since it joined the World Trade Organization in 2001 and that there was a consensus both in the U.S. and around the world that Beijing had not kept its end of the bargain.
“When I talk to CEOs here in Arkansas and all across the country, they all tell me the exact same story: it’s hard to do business in China, they have a capricious system.”
Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama