OTTAWA (Reuters) – Bank of Canada Governor Stephen Poloz said rising global protectionism could drive up the cost of goods and cause job loss, but dismissed the conclusion that Canadian exports will suffer under a Trump administration.
In a year-end interview with the Globe and Mail newspaper, Poloz said the rise in protectionism began long before the U.S. election that brought Republican Donald Trump to power.
Canada is dependent on global supply chains, and if the links between companies are hurt by anti-trade sentiment, the economic consequences for all countries in the chains could be severe, Poloz warned.
“That could be a recipe for a really expensive product that would not sell very well,” he said in the interview, published in the newspapers Saturday edition. “And so you could lose all the jobs, instead of some of the jobs … It’s not obvious that suddenly, if you put in a protectionist measure, that your economy will do better. It just isn’t.”
But he dismissed as “hypothetical” the notion that Canada will automatically be the loser or that Trump’s protectionist rhetoric will lead to a permanent impairment of Canada’s export capacity. He said trade has become too globalized and complex to disentangle or predict.
“It’s not us and them,” he says of global trade. “We are making stuff as a team. It’s very complex to disrupt it and be confident about what the results might look like.”
Canada’s central bank held rates steady in December amid tepid economic growth, and policy is diverging from that of the United States, where the Federal Reserve raise rates last week as the U.S. recovery gains strength.
Poloz said the central bank learned from its experience in October, when he whipsawed the markets by revealing policymakers had considered a rate cut after the bank earlier in the day held rates steady and cut its economic forecasts.
“We learned something from that,” he says. “I don’t want to claim that we’re perfect, or that I’m perfect, that’s for sure.”