Tariffs are an attack on the economy: Alan Greenspan

Former Federal Reserve Chairman Alan Greenspan said the tit-for-tat trade war between the U.S. and China is a “terrible idea on both sides.”

“Remember what a tariff is -- it's an excise tax,” he told FOX Business’ Maria Baritromo on Thursday. “Excise taxes when they are imposed are the same as any tax -- they withdraw purchasing power from an economy.”

“So if you have two industrial giants, both taking on severe levels of that type of analysis, in other words having a great deal of loss of purchasing power, it’s not good for either one… there is a winner in the fight. But both sides lose. So the winner is the one who loses the least.”

President Trump has blasted China for unfair trade practices, including intellectual property theft. Greenspan said this is where “he happens to be correct.”

“I remember that when we first dealt with the Chinese,” he said, “We essentially had a significant number of places where we could build plants provided we made the technology available to the Chinese partner who was made part of us as a condition of coming in. And then what would happen is they'd build the plant. And then they'd build another plant, which they had a hundred percent ownership, and the issue of intellectual property is really an issue. The rest of it is not.”

Greenspan, in regards to the military buildup and Huawei technology, warned that it could ultimately end with a nuclear conflict.

“Well, the issue is that you're always left with the issue of where you end it. And at the end of it, it's a nuclear confrontation,” he said. “And neither side on all the countries which have nuclear capacity have chosen not to get up to that edge. The only way to cause a problem is you do it inadvertently and that can happen.”


The U.S., last week, hiked tariffs on $250 billion of Chinese goods from 10 to 25 percent. But Greenspan warned that “people do not understand what tariffs are.”

“They are attacks and they are attacks on the country which implements them,” he added.