European Central Bank (ECB) President Christine Lagarde on Thursday urged deeper trade integration as a countermeasure against escalating U.S.-EU trade tensions, warning that economic growth in the eurozone could suffer significantly.
Speaking before the Committee on Economic and Monetary Affairs at the European Parliament, Lagarde highlighted the potential fallout from intensifying trade frictions, which she said could slow eurozone growth by up to half a percentage point and drive inflation higher.
“The eurozone, deeply embedded in global supply chains and highly dependent on trade—particularly with the U.S.—is especially vulnerable to shifts in trade policies,” she cautioned.
Citing ECB analysis, Lagarde warned that a 25% tariff imposed by the U.S. on European imports could shave approximately 0.3 percentage points off eurozone growth in the first year. A retaliatory response from Europe, she added, could deepen the contraction to 0.5 percentage points.
While the most immediate impact would be felt in the first year after the tariffs take effect, Lagarde warned that the drag on economic output could persist. She also pointed out that U.S. tariff policies are likely to curb investment and exports, further clouding the eurozone’s economic outlook.
According to the ECB’s latest projections, eurozone GDP is expected to grow by 0.9% in 2025, followed by 1.2% in 2026 and 1.3% in 2027.
Lagarde underscored the need for increased trade cooperation to mitigate risks. “The answer to the current shift in U.S. trade policies should be more—not less—trade integration, both with global partners and within the EU,” she emphasized.
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