European Central Bank president advocates diplomacy over retaliation in ​ US-EU trade

European Central Bank (ECB) president Christine Lagarde has called for a diplomatic approach to address potential US import tariffs on European goods. In an interview with the Financial Times, published on the ECB's website on Thursday, Lagarde stressed that avoiding a trade war would serve the best interests of all parties involved.

"We seem to be straying more into what I would call a chequebook strategy," Lagarde observed. She pointed to the EU’s previous approach during trade tensions with the US, highlighting the value of negotiation over escalation. "In the previous trade conflict with the US, the EU also used a strategy of 'not hitting back immediately, but negotiating,'" she explained.

Lagarde’s comments come amid rising global trade tensions following US President Donald Trump’s announcement of a 10 per cent import duty on Chinese goods, to take effect immediately upon his inauguration in January. These new tariffs are in addition to existing duties on Chinese products. Canada and Mexico will also have to pay an import duty of 25 per cent. Additionally, Trump has threatened import tariffs of up to 20 per cent on goods from other regions, including Europe.

Reiterating warnings about the damaging effects of a global trade war, Lagarde urged the EU to signal its willingness to negotiate with the US. "I think this is a better scenario than a pure retaliation strategy, where nobody really wins," she said. Lagarde cautioned that initiating or responding aggressively to a trade war risks escalating tensions with far-reaching consequences. "This cannot be in anyone's interest, neither the US nor Europe, nor anyone else. This would cause a global contraction of GDP," she warned.

While it is still too early to fully assess the economic impact of Trump’s proposed tariffs, Lagarde acknowledged that they could lead to slightly higher inflation in the short term. However, a broader trade war, she noted, would likely result in reduced global economic growth.


European Central Bank (ECB) president Christine Lagarde © PHOTO JURE MAKOVEC / AFP


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