Lagarde: Mandatory trade policies cannot be sustained. Protectionism cannot solve the root problems.

On June 11, European Central Bank President Christine Lagarde said in her speech that mandatory trade policies are not a sustainable solution to today’s trade tensions. In mitigating imbalances, protectionism does not address the root causes, but erodes the foundations of global prosperity. With countries now deeply integrated through global supply chains – but no longer geopolitically aligned as they once were – the stakes are greater than ever. Coercive trade policies are more likely to trigger retaliation and lead to consequences that are harmful to both parties. The ECB’s recent analysis highlights the common risks we face. Our staff found that if global trade were to split into competing blocs, world trade would shrink sharply and things would be worse for every major economy.