### Trump’s Proposed Tariffs on China Could Lower Global Inflation, Says Bank of England Economist

The potential implementation of significant US tariffs on Chinese imports by Donald Trump could help reduce global inflation by decreasing the prices of goods in other countries, according to Swati Dhingra, a key Bank of England official. Dhingra, who serves as an external member of the Bank’s monetary policy committee, expressed that a hefty 60% tariff on Chinese goods sold in the US might compel Chinese exporters to slash their prices elsewhere to sustain their trade volumes.

Speaking at a conference in London, Dhingra highlighted the uncertainty surrounding the new president-elect’s policy decisions from the campaign trail. During his campaign, Trump had indicated plans to impose tariffs of up to 60% on China and 20% on other US trading partners. Dhingra noted that the "textbook" effect of the world’s largest importer setting steep tariffs on goods from the largest exporter would typically result in global prices falling.

Chinese companies are likely to combat stringent trade barriers by seeking alternative markets, potentially reducing their prices to maintain their sales volumes internationally, including in the UK. Dhingra explained, "It takes a massive amount of demand out of the world market. The way exporters, say in China, would respond to that would be to respond with prices, world prices, as they don't want to lose market share."

While economists have cautioned that punitive tariffs on imports could spike inflation in the US, impacting American consumers, the repercussions would also extend to the global economy. Dhingra emphasized that the response to a potential trade war would be critical. Should other countries retaliate with their tariffs or protectionist measures to block a flood of cheaper Chinese products, the global situation could alter dramatically.

Drawing from the Brexit experience, Dhingra pointed out that the UK's departure from the EU led to a permanent spike in the prices of goods for British households, initially driving inflation before stabilizing at a higher price level. "We saw much higher price increases in the UK compared to everywhere else and those pressures have now come off much more quickly as well, for the reason they're not inflationary, they change the price levels, permanently," she noted.

Moreover, analysts warned that escalating trade tensions between the US and Europe could further strain the eurozone economy. The euro risks falling to parity with the US dollar for the first time since late 2022 if a transatlantic trade war ensues.