“It’s been put on pause,” El-Erian said of American exceptionalism. “It’s too early to say if the damage inflicted is irreversible.”
El-Erian said that a strategy of elevating tariffs to work out better trade terms with other countries and then de-escalating could be beneficial, but the idea of levying tariffs to raise external revenue while also protecting U.S. industry makes little sense.
“Some of these objectives are contradictory,” he said, adding that this kind of move is “liable to inflict collateral damage.”
As a result of a prolonged trade war, other countries may put their own tariffs on China or start their own tariff escalations amongst each other, leading to higher prices worldwide.
El-Erian’s comments come as trade negotiations continue, with the U.K. most recently having struck a deal with the U.S. earlier this month. The U.S. maintained a 10% duty on most U.K. goods but lowered tariffs on a set number of British auto imports, and exempted U.K. steel and aluminum from tariffs. The U.K. agreed to eliminate tariffs on a quota of up to 13,000 metric tons of American beef and 1.4 billion liters of ethanol.
For years, the strong economy and exceptionalism of American industry led to “the world outsourcing its savings to America,” El-Erian noted.
