Trade war may lower growth and inflation in euro zone, ECB's Cipollone says

Reuters

Tue, Apr 29, 2025, 1:05 AM 2 min read

FRANKFURT (Reuters) -A planetary commercialized warfare could little some economical maturation and ostentation successful the euro portion and it could person an "unambiguously recessionary effect" connected the countries involved, ECB committee subordinate Piero Cipollone said connected Tuesday.

Cipollone's remarks strengthened the lawsuit for a further ECB complaint chopped successful June and besides warned astir the risks of a much fragmented world, specified arsenic obstacles successful the travel of superior and adjacent a imaginable erosion of the U.S. dollar's presumption arsenic the world's harmless haven currency.

"The caller summation successful commercialized argumentation uncertainty could trim euro country concern business by 1.1% successful the archetypal twelvemonth and existent GDP maturation by astir 0.2 percent points successful 2025-26," helium said. "The observed summation successful fiscal marketplace volatility mightiness connote little GDP maturation of astir 0.2 percent points successful 2025."

While the ostentation interaction is little clear, the abbreviated to medium-term effects whitethorn adjacent beryllium disinflationary for the euro area, Cipollone added.

He besides shed airy connected the deeper implications of moving from a satellite dominated by the United States and the dollar to 1 that is fragmented into economical blocs.

"If the semipermanent implications of higher tariffs materialise, notably successful the signifier of higher inflation, slower maturation and higher U.S. debt, this could undermine assurance successful the U.S. dollar’s ascendant relation successful planetary commercialized and finance," helium said.

Cipollone added cardinal banks needed to hole for "sudden stops successful superior flows, outgo disruptions and volatility successful currency markets requires" via "robust contingency readying and situation absorption frameworks" portion large economies should look for alternatives to protectionism.

"The G20 countries committed to preserving unfastened commercialized could telephone an planetary commercialized league to debar beggar-thy-neighbour policies and instead...support the planetary system successful this play of uncertainty and lend to trim planetary imbalances," helium said.

(Reporting by Balazs Koranyi;Editing by Francesco Canepa and Kate Mayberry)