Global trade protectionism to push up inflation, volatility in FX markets

[Yong John]

Global trade protectionism to push up inflation, volatility in FX markets: think tank

The recent expansion of trade protectionism will put pressure on the global economy, leading to inflation and higher volatility in currency exchange rates, a South Korean state-run economic think tank said Friday.

The Korea Institute for International Economic Policy made the assessment in a meeting of trade experts hosted by the Ministry of Trade, Industry and Energy, where participants discussed the shifts in trade policies of major economies, according to ministry officials.

KIEP said the government-led growth policies of emerging countries in the past gave justification to developed countries to expand protectionist policies during economic downturns.

But the ongoing tariff war cannot be a fundamental resolution to problems involving oversupply and slow economic growth, it said, noting that tariffs will only put pressure on the global economy by instigating high inflation and exchange rate volatility.

The US imposed 25 percent tariffs on all steel and aluminum imports earlier this month, with plans to introduce duties on auto imports, as well as reciprocal tariffs for trading partners with high trade surpluses with the country.

The European Union and other major economies have been scurrying to devise countermeasures against Washington's moves.

"The trade environment has been rapidly changing due to economic security issues, the development of artificial intelligence technology and the spread of protectionist trade policies," said Lee Jae-keun, director general for new trade strategy and policy at the ministry.

"The government and trade-related institutions should work to swiftly respond to shifts in the trade policies of the US and the EU, and help open new opportunities for local industries by devising trade policies tailored to different markets."  The Korea Herald, March 28, 2025.