Impact of US Tariffs on EU Growth

European Central Bank President Christine Lagarde has highlighted the potential negative impact of US tariffs on European Union's economic growth. According to Lagarde, the imposition of 25% tariffs by the United States on European imports could reduce the Eurozone's growth by approximately 0.3 percentage points in the first year.

Potential EU Response and Its Consequences

Lagarde also discussed the possibility of the EU responding with increased tariffs on US imports, which could exacerbate the situation, potentially lowering growth by about half a percentage point. She emphasized that while the most significant impact on economic growth would be felt in the first year following the tariff increase, the negative effects would persist over time, albeit diminishing.

Uncertainty in Inflation Outlook

The ECB president pointed out that the ongoing trade war introduces significant uncertainty into the inflation outlook. The combination of EU retaliatory measures and a weaker euro exchange rate could lead to an increase in inflation by approximately half a percentage point, further complicating the economic landscape.