OECD: Global Economy at Risk from Protectionist Measures

OECD notes that items affected by U.S. tariffs have jumped in price this year. Consumer prices for washing machines leapt 20 percent after washer imports to the U.S were slapped with tariffs. Tariffs on imports of steel and aluminum caused domestic steel pricing to jump 18.6 percent between January and August. Exports of U.S. pork and vehicles declined as a result of retaliatory tariffs.

OECD finds that economic policies face several challenges amidst considerable uncertainty:

• “A gradual normalization of monetary policy is needed, but to a varying degree across economies. Fiscal policy choices should be focused on measures that improve the prospects for sustainable and more inclusive medium-term growth. Any margins from stronger growth should be used to help build fiscal buffers.
• “Monetary and fiscal policy space needs to be restored gradually to provide scope for support in a future downturn.
• “Policy choices in many emerging-market economies should focus on restoring confidence and stability, and avoid harm to medium-term growth prospects.
• “Enhanced deployment of macro-prudential policies would strengthen financial resilience.
• “Greater structural reform ambition is required to enhance medium-term living standards and improve opportunities for all.”

Accelerated trade tensions, including additional tariffs, will hurt production and incomes in the countries imposing trade restrictive measures, said OECD. 

“The resulting decline in trade intensity would also harm medium-term growth prospects by impeding future productivity gains and lowering competition. In contrast, steps to lower tariffs in a coordinated manner could bring widespread gains.”