Lagarde went to European legislators on Thursday, describing a scenario where economic growth It could fall half a percentage point in the first year, If tariffs were imposed and reprisals. He also indicated that inflation could increase in the same proportion in response to these events.
Despite this, Lagarde suggested that The effect on inflation would be temporary and indicated that the ECB not counteracted this with an increase in rates.
After Lagarde’s speech, andL Euro fell to $ 1,0850, a decrease since its previous value of $ 1,0878 before its speech.
The impact of Trump’s tariffs on the EU
The president of the European Central Bank (ECB), Christine Lagardesaid a 25% American tariff About imports from Europe would reduce the growth of the euro zone by approximately 0.3 percentage points During the first year. But, a European response consisting of increasing tariffs on US imports would further increase this figure, even approximately half a percentage point.
This has been expressed during his speech before the Eurocamara Economic Affairs Commission, where he said that most of the impact on economic growth would concentrate around the first year After the climb of the tariffs. Subsequently, “it would decrease over time, leaving, however, a Persistent negative effect on the production level “.
In addition, he believes that, in such a scenario, inflation perspectives would become “Significantly more uncertain“In the short term,” EU retaliation measures and a weaker euro exchange rate, derived from the lowest US demand for European products, could raise inflation at approximately half a percentage point. The effect would be mitigated in the medium term because the lower economic activity would moderate inflationary pressures“, said.
In this sense, it should be remembered that, at the beginning of March, the ECB updated its macroeconomic projectionswith an upward review of inflation and a reduction of growth. Thus, the technical staff of the ECB now foresees an average general inflation of 2.3% in 2025, of 1.9% in 2026 and 2% in 2027. In addition, it estimates a 0.9% growth by 2025, 1.2% by 2026 and 1.3% by 2027.
On the policies of the new US administration, Lagarde considers that they cause uncertainty about the future trajectory of commercial policy to be shot “at exceptionally high levels. “
“In our interconnected world, the increase in commercial friction is detrimental to global growth and well -being. Costs increase, they disturb production already often force to adjust supply chains. This also encourages reprisal policies of the type ‘eye per eye’, even more undermining the benefits of free trade,” he said underlining that the eurozone “It is particularly exposed to changes in commercial policies. “
Source: Ambito
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