U.S. Markets

Trade war negative for economy says Fed's Williams: El Pais

San Francisco Federal Reserve President John Williams poses for a photo at the Federal Reserve Bank of San Francisco, California, U.S., January 19, 2018. REUTERS/Ann Saphir

MADRID (Reuters) - A significant global trade war would have very negative economic effects though it is still too soon to say if such a conflict will arise, San Francisco Federal Reserve Bank President John Williams said in an interview with Spanish newspaper El Pais.

Such a trade war would destroy supply chains leading to sharp cost increases for consumers, he said. This in turn would lead to a drop in productivity and price rises, Williams said in the interview published on Monday.

However, asked whether he saw a risk of such a trade war, he said it was too soon to say.

“The reality is that it is not so serious as some headlines suggest. But if the conflict increases there will be less growth, more inflation and lower quality of life all over the world.”

The removal of extraordinary measures adopted by central banks over the last few years should be clearly communicated in advance, he said.

“It should be repeated until people have had enough of hearing the message,” he said in the interview which was published in Spanish adding that any changes should be gradual.

Reporting by Paul Day; Editing by Sonya Dowsett