Shortly before the US elections, Deutsche Bundesbank boss Joachim Nagel spoke out against trade barriers such as the punitive tariffs planned by presidential candidate Donald Trump. “Are tariffs a good way to limit the disadvantages of globalization from a country’s perspective and to benefit as much as possible from the advantages of trade? Basically no,” he said on Monday in Hamburg.
The central banker added: “With tariff increases we are making consumption more expensive and fueling inflation. That is making us all poorer.”
Image: BRITTA PEDERSEN (POOL)
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Image: BRITTA PEDERSEN (POOL)
Even if not everyone has benefited from globalization, it is important not to forego its wealth-increasing effects: “Being open to the world is a very important attitude that helps us to perceive reality and accept it without prejudice,” said Nagel.
The German economy is also worried. “The bottom line is that Trump would be bad for us,” said Volker Treier, foreign trade expert at the German Chamber of Commerce and Industry (DIHK), on Monday in Berlin. In the event of a Trump victory, companies in the USA could benefit from tax cuts, generous depreciation options and fewer regulations.
**Interview with Joachim Nagel, President of the Deutsche Bundesbank**
**Host:** Thank you for joining us today, Mr. Nagel. Let’s dive right into your recent comments regarding trade barriers, particularly in light of the upcoming US elections. Can you clarify your stance on the punitive tariffs proposed by Donald Trump?
**Nagel:** Thank you for having me. My position is clear: tariffs are fundamentally not an effective way to address the challenges of globalization. While they might seem like a short-term solution, in reality, they increase costs for consumers and, ultimately, contribute to inflation. This makes our economies weaker and everyone poorer in the long run.
**Host:** That’s a compelling argument. You mentioned inflation as a consequence of higher tariffs. Can you elaborate on how this plays out for everyday consumers?
**Nagel:** Certainly. When tariffs are implemented, goods become more expensive. Consumers are then forced to pay more for the same products, which can diminish their purchasing power. This can lead to a decrease in overall consumption, which harms economic growth. In a sense, tariffs can create a vicious cycle of rising prices and reduced economic activity.
**Host:** With the rise of protectionism globally, what alternatives would you suggest to balance the challenges posed by globalization?
**Nagel:** I believe the focus should be on fostering innovation, investing in education, and creating a more adaptable workforce. Enhancing international cooperation is also crucial. By working together, countries can tackle the downsides of globalization without resorting to tariffs that disrupt trade flows.
**Host:** It sounds like you advocate for a proactive, rather than reactive, approach. As a leading figure in central banking, what role do you see central banks playing in the context of international trade?
**Nagel:** Central banks can provide stability and foster an environment conducive to sustainable growth. By ensuring monetary policies are well-calibrated, we can mitigate inflationary pressures while allowing economies to adjust to global trade dynamics. This paves the way for long-term stability and resilience against external shocks.
**Host:** Thank you, Mr. Nagel, for sharing your insights on this important issue. It’s clear that thoughtful economic policies are essential as we navigate an evolving global landscape.
**Nagel:** Thank you for the conversation. It’s crucial for us to keep discussing these matters as they directly impact our economies and societies.