Published by Jessica Weisman-Pitts
Posted on November 18, 2024
3 min readLast updated: January 28, 2026
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FRANKFURT (Reuters) -Two top European Central Bank policymakers signalled on Monday they were more worried about the damage that expected new U.S. trade tariffs would do to economic growth in the
FRANKFURT (Reuters) -Two top European Central Bank policymakers signalled on Monday they were more worried about the damage that expected new U.S. trade tariffs would do to economic growth in the euro zone than any impact on inflation.
Investors and policymakers around the world are awaiting the details of U.S. President-elect Donald Trump’s new trade policy after he made protectionism a key element of his pitch to voters during the campaign.
ECB Vice-President Luis de Guindos and Bundesbank President Joachim Nagel put the emphasis on the hit that new trade restrictions would have on output while they appeared more sanguine on the outlook for inflation. They were later echoed by the ECB’s top banking supervisor, Claudia Buch.
“The balance of macro-risks has shifted from concerns about high inflation to fears over economic growth,” de Guindos told an event in Frankfurt.
“The growth outlook is clouded by uncertainty about economic policies and the geopolitical landscape, both in the euro area and globally. Trade tensions could rise further, increasing the risk of tail events materialising.”
Some analysts fear Trump’s second term could bring a much worse rerun of the Republican former president’s 2018-2019 trade war with China, with ramifications for Europe and possible retaliation.
Nagel, speaking in Tokyo, said the tariffs promised by Trump would upend international trade but he was “not overly” worried about their impact on inflation.
“Global integration would have to decrease substantially to cause a noticeable rise in inflationary pressures,” he said. “And, so far, we have not seen this.”
He said that if geoeconomic fragmentation did lead to greater inflationary pressure, the ECB and other central banks would keep it at bay via higher interest rates.
The ECB has cut interest rates three times since June as inflation in the euro area nears its 2% target. But it has also downgraded its growth projections twice as a recovery in the 20 countries that share the euro proves elusive.
Nagel argued that the ECB could not “completely neglect output” and would not overreact to moves in inflation.
“We operationalise our mandate by aiming for inflation of 2% over the medium term,” he said. “This allows us to respond flexibly and avoid overreactions that could lead to destabilisation.”
Similarly, de Guindos said he was confident inflation would stabilise at 2% next year and monetary policy would follow suit.
The head of the ECB’s supervisory arm, Claudia Buch, weighed in later on Monday, saying protectionism may disrupt Europe’s growth potential.
Protectionist tendencies could disrupt the global supply chains that are essential to European industries, with a negative impact on firms’ growth potential, competitiveness and financial resilience,” Buch told the European Parliament.
(Reporting by Francesco Canepa and Tom Sims; Editing by Toby Chopra, Susan Fenton and Christina Fincher)
Monetary policy refers to the actions taken by a central bank to manage the money supply and interest rates to achieve macroeconomic goals such as controlling inflation, consumption, growth, and liquidity.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks attempt to limit inflation to stabilize the economy.
Economic growth is the increase in the production of goods and services in an economy over a period of time, often measured by the rise in Gross Domestic Product (GDP).
A central bank is a national institution that manages a country’s currency, money supply, and interest rates. It oversees the banking system and implements monetary policy.
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