Protectionism: War and peace in the trade arena

Willem Verhagen, senior economist - multi-asset, at NN Investment Partners, discusses the causes and costs of protectionism, and the implications of a trade conflict between the US and China.

Protectionism is essentially a very crude and destructive policy response to a real problem. Over the past 30 years, policymakers have tended to ignore the costs that come with the benefits of an increase in trade openness. The main benefit is that it enables a country to increase the amount of consumption obtained from a given input of production factors. The costs are twofold. First, those who have a big interest in sectors which shrink as a result of more trade openness suffer a loss of income for which they are not always sufficiently compensated. Second, a larger degree of ope...