In the eurozone, the customs duties promised by Donald Trump could lead to an increase in prices, particularly if Europe responds with retaliatory measures, explains Isabel Schnabel.
A trade war with the United States “is very likely” under the presidency of Donald Trump, with negative consequences for activity and prices, warned a senior official of the European Central Bank (ECB) on Sunday. Customs duties played a role “a central role in Donald Trump's communication”who will be inaugurated president on Monday, therefore, “it is very likely that a trade war will break out”declares Isabel Schnabel, member of the ECB executive board, in an interview on the YouTube channel of the German financial advice site Finanztip.
Donald Trump plans to impose, from January 20, customs duties of 25% on all products from Mexico and Canada, citing the fight against the entry of drugs and migrants. China, already targeted during his first term, could also see its taxes increase by 10%.
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“A poison for the economy”
The euro zone is also in its sights, particularly Germany which has the highest trade surplus with the United States. For the euro zone, these duties could lead to a rise in prices, particularly if Europe responds with retaliatory measures, all leading to “an increase in import prices”explains Isabel Schnabel. In the immediate future, the current uncertainty is “a poison for the economy” by slowing down consumption and investment, she warns.
-In general, tariffs lead to losses in prosperity on a global scale, according to the central banker: while globalization has brought significant wealth gains to Europe, “we may now need to prepare to see at least some of these gains reversed”she tells the financial advice site.
Despite this threatening context, the ECB is “on the right track” to achieve its inflation target of 2%, assures Isabel Schnabel, which should allow the institute to continue to lower its rates, the next opportunity being given at the end of January. After the four cuts decided since June, to reduce its main key rate from 4% to 3%, the ECB is getting closer “from the point where we will have to carefully consider how far we can go”concludes the central banker, a supporter of a rigorous monetary policy.
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