ECB warns: Trump's tariffs could slow Eurozone growth to 1%
Kyiv • UNN
The head of the Central Bank of Greece, Yannis Stournaras, said that the trade war will have an impact on Europe's economic growth. Tariffs may lead to a decrease in inflation below the ECB's targets.
The introduction of tariffs by US President Donald Trump could slow down the economic growth of the Eurozone by 0.5-1 percentage points, said the head of the Central Bank of Greece, one of the oldest members of the ECB Governing Council, Yannis Stournaras, in an interview with the Financial Times published on Monday, writes UNN.
Details
Yannis Stournaras warned that the approaching global trade war is likely to have a strong impact on Europe's economic growth.
"A significant negative impact on growth could lead to activity being much weaker than expected, leading to lower inflation below our targets," he said.
One of the oldest members of the ECB's Governing Council, Stournaras warned that the Eurozone faced a shock at a time when growth prospects were already "modest" and inflation was on track to reach the ECB's medium-term target of 2%. The ECB is due to make its next interest rate decision on April 17.
The US is the largest export market for goods produced in the EU, accounting for about 21% of the bloc's total exports in 2024. While tariffs are likely to reduce demand in the US, economists are also concerned that even higher tariffs against China could lead to the redirection of Chinese goods to Europe, which could further reduce inflation.
Ahead of Trump's tariff announcement last week, the ECB signaled a possible pause in interest rate cuts.
ECB President Christine Lagarde said in March that eurozone inflation could rise by half a percentage point in a trade war due to "EU retaliatory measures and a weaker euro exchange rate."
Stournaras disagreed, arguing that "tariffs are definitely a deflationary measure" for the Eurozone. He stressed that the US protectionist steps were "worse than expected" and created an "unprecedented" degree of "global political uncertainty", which is putting pressure on economic activity.
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Analysts and investors said Trump's tariff announcements increased the likelihood of another quarter-point rate cut later this month.
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JPMorgan, which previously expected the ECB to keep rates at 2.5% in April, changed its view on Friday and now forecasts another quarter-point cut, followed by two more in June and September. Goldman Sachs economists also said on Friday that a cut in April is "now very likely."
Asked if the situation was serious enough to warrant a 50 basis point rate cut, Stournaras declined to comment.
While it was difficult to "accurately assess the impact of tariffs", he warned that the negative impact on Eurozone growth "could be between 0.5 and 1 percentage points". In March, the ECB lowered its forecast for Eurozone growth for 2025 to just 0.9 percent.
