The President of the European Central Bank (ECB), Christine Lagarde, told the Financial Times that a full-scale trade war would be “ negative for everyone ”, and not just for countries targeted by American customs duties.
« It can't be in anyone's interest. Not from the United States, not from Europe, not from anyone. This would lead to a global decline in GDP (gross domestic product) “, she said in this interview published Thursday.
In response to Trump's claims that he could “make America great again”the President of the ECB declared: “How can we make America great again if global demand is declining? » She also estimated that tariffs would, in the long term, be harmful to global growth.
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Yes “not retaliate”
Consequently, according to her, the EU should not “not retaliate, but negotiate”. Christine Lagarde said Europe should face a second Trump term with a “checkbook strategy”, in which she would propose “to buy certain things in the United States”such as liquefied natural gas and defense equipment. “This is a preferable scenario to a strategy of pure retaliation, which can lead to a process of retaliation where no one really wins”declared the President of the ECB.
Concerning the announcements of customs duties of 10 to 20% on Chinese products, mentioned by Donald Trump last week, Christine Lagarde sees this as rhetoric favorable to negotiations. “The fact that you proposed a range means that you are open to discussion”she said, adding that this created the opportunity to “sit down at the table and see how we can work together”.
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Thus, the guardian of the euro admitted that her thoughts on how to manage a second Trump term had “a little changed” during the year 2024, and that Europe could face these new threats. “It is up to us, Europeans, to transform this threatening attitude into a challenge to which we must respond”declared the President of the ECB. While she disputed claims that Europe was mired in a crisis, the current situation was “a great awakening”. “Europe is lagging behind. But I wouldn't say she can't catch up.”she said.
Clouds darken over the global economy
The ECB's statement follows the publication of the institution's half-yearly report on the financial stability, published on November 20. The European Central Bank clearly pointed out the risks for the stability of the euro zone from the rise in trade tensions in the world, while refraining from citing Donald Trump's victory in the American presidential election.
“The outlook for financial stability is clouded by increasing macro-financial and geopolitical uncertainties, as well as growing trade policy uncertainty,” declared Luis de Guindos, vice-president of the ECB, during a press conference.
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The future Republican president's plan to apply global customs duties of 10% on American imports, without excluding increased duties on certain products, will not be without consequences on growth, he warns, and even on the euro , particularly if the bank were to accelerate the reduction of its key rates in the event of a too strong slowdown in exports.
Accordinglythe ECB believes that weak growth now poses a greater threat than inflation in the eurozone, even though growth is not explicitly in its mandate. According to the latest figures, economic growth in the euro zone reached 0.4% in the third quarter, its highest level in two years. For its part, inflation is now on the central bank's target of 2% in October.
