European Central Bank chief Mario Draghi. Photo: Flickr Commons

Escalating trade conflicts could have a ripple effect on financial markets and hurt the global economy, forcing countries to keep interest rates at extremely low levels, central bank chiefs warned on Wednesday.

Major central banks have begun moving away from easy-money policies introduced since the global financial meltdown in 2008, so growing tensions over trade come at a difficult time.

At a forum in Sintra, Portugal, the heads of the Federal Reserve, European Central Bank, Bank of Japan and Reserve Bank of Australia appealed for calm, warning that further escalation could be very costly.

When US President Donald Trump called this week for a fresh round of tariffs on $200 billion of Chinese goods, raising the ante after he previously approved tariffs on $50 billion of goods, global stocks declined.

“It’s very worrisome and again, I can’t see any positive,” said ECB President Mario Draghi, who was hosting the event, Europe’s equivalent of the US Federal Reserve’s annual economic symposium in Jackson Hole, Wyoming.

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