Members of the Board of Directors of the Central Bank emphasize that Europe should be better prepared than in 2018
Protectionist policies by the next United States administration will hurt global economic growth and Europe should be better prepared than in 2018, European Central Bank board members have warned.
Donald Trump has promised a big increase in trade barriers, including a flat 10% tariff on all imports from foreign countries and a 60% tariff on imports from China aimed at reducing the US trade deficit. “What we do know is that the high import tariffs that are being talked about could have harmful effects on the global economy,” Finnish central banker Olli Rehn said, adding: “A new trade war is the last thing we need at a time of geopolitical rivalry – mainly between allies”.
Austria’s central banker Robert Holzmann warned that if Donald Trump implements the policies he has announced, US interest rates and inflation will remain high, which will mean upward pressure on prices elsewhere. “He means what he has said and it is likely that he will implement it faster than we expect. If this is the case, what are the markets waiting for? That interest rates will remain higher and that inflation will also be higher,” said Robert Holtzman, adding that this would put upward pressure on the dollar and Eurozone inflation.
Robert Holzmann added that if the dollar stabilizes and approaches 1-to-1 parity against the euro, this will have a measurable impact on import costs, notably energy, making it harder for the ECB to meet its 2% inflation target and possibly it will delay the process. Trade tensions between the US and Europe had been rising during Trump’s first presidency and Europe was struggling to find a common response, a mistake it must not make this time, Ollie Rehn said, adding that “if is to start a trade war, Europe should not be unprepared, like in 2018”.
“The ECB must, as part of its mandate, act as an anchor of economic and monetary stability in this turbulent landscape. No one should doubt that we will shoulder this responsibility in full,” warned the Finnish central banker.
