Trade protectionism is a “dead end” that may score political points but will ultimately hurt the U.S. economy, one of the most influential Federal Reserve officials said on Thursday in the central bank’s strongest defense yet of open borders in the face of a skeptical Trump Administration.
William Dudley, head of the New York Fed, did not mention U.S. President Donald Trump by name in a speech at the Bombay Stock Exchange. But he gave a full-throated economic and even political argument for resisting trade barriers that he said would hurt growth and living standards in both the United States and around the world.
“Protectionism can have a siren-like appeal,” said Dudley, a close ally of Fed Chair Janet Yellen and a key decision-maker on U.S. interest-rate policy.
“Viewed narrowly, it may be potentially rewarding to particular segments of the economy in the short term,” he said in prepared remarks. “Viewed more broadly, it would almost certainly be destructive to the economy overall in the long term.”
The Fed is independent but answerable to Congress, and its governors are appointed by the White House and confirmed by the Senate. While Fed officials usually avoid recommending fiscal policies, several have highlighted the benefits of open borders since Trump was elected on an “America First” platform of revamping or ripping up trade deals.
Dudley said he was speaking out because “we are at a particularly important juncture” in which trade issues could imperil the long-term health and productivity of the economy and “the economic opportunities available to our people.”