Fed's James Bullard says other countries won't wipe tariffs with the US
"The positioning here is that the other countries are all free trade and the U.S. is not. If that's really what we're saying then just drop all tariffs and all non-tariff barriers. Go down to zero. That would be better outcome for the whole world," Bullard told CNBC's "Squawk Box Europe" Monday.
"Why is that not going happen? Because they're protecting their industries, that's why it's not going to happen. So, they're protectionist."
Chinese officials, in response to Trump's moves, have called for compliance with World Trade Organization (WTO) rules and opposition to protectionism. But a look at Chinese policies shows that the country has long engaged in protectionism of its own industries, as Bullard pointed out.
Beijing heavily subsidizes domestic industries, creating an uneven playing field for global competition, and has strict foreign ownership limits on most sectors. It does not allow foreign investors equal access to its industries, and engages in practices like forced technology transfers, which require international businesses operating in China to share their technology and operate without adequate protection of their intellectual property. U.S. and other foreign businesses operating on the ground have long called for reforms in these areas.
Perhaps spurred by the tariff pressure, Beijing has pledged to quicken the pace of its reforms to open up its economy and ease limits to foreign investment.
Europe always imposed greater tariffs on the US
The EU also currently imposes a 10 percent tariffs on U.S. auto imports, a target of Trump's ire when he threatened in late June to levy a 25 percent tariff on European cars entering the American market. His meeting with European Commission President Jean-Claude Juncker on July 25 staved off the tariffs as the two outlined an approach toward a zero-tariff regime on a number of goods. Economists have said that tariffs on autos could pose the biggest threat to the U.S. economy.
Bullard, who oversees the Federal Reserve's Eighth District and was named in 2014 as the seventh most influential economist in the world, stopped short of fully endorsing the U.S. president's trade policies. But they may have have set global trade players on a more constructive path, he said.
"It's controversial, that's for sure. But I think the discussion should be focused on what's the end state here," Bullard, who is not currently a voting member of the central bank, said.
"The end state should be to reignite a global debate on trade — I think that has happened — and to think about where we want to get to. And where we want get to is very few or none in terms of tariff barriers or non-tariff barriers to trade."