(Bloomberg) -- Federal Reserve Chairman Jerome Powell and one of his top lieutenants praised the benefits of a global economy without trade restrictions on a day when President Donald Trump announced plans to slap tariffs on imported steel and aluminum.
Responding to questions Thursday from the Senate Banking Committee, Powell said a system where goods and services flow freely is a net positive for many countries, though the benefits aren’t spread equally. New York Fed President William Dudley was even more explicit in his criticism of trade barriers, saying in a speech in Brazil that “protectionism is not the answer.”
Trump said the U.S. plans to impose 25 percent tariffs on steel imports and 10 percent on aluminum, with a formal order to be signed next week. “You’re going to have protection for the first time in a long time,” he told a gathering of metals industry executives at the White House.
Powell, without commenting directly on any specific country’s policy, said the “best approach is to deal directly with the people who are directly affected, rather than falling back on tariffs.”
Dudley said such penalties “often backfire” and hurt workers.
“Trade barriers are a very expensive way to preserve jobs in less competitive or declining industries,” Dudley said. “Raising trade barriers would risk setting off a trade war, which could damage economic growth prospects around the world.”
(Updates with Trump’s annoucement in third paragraph.)