Warning of a Global Trade War

European Central Bank Vice President Luis de Guindos issued a stark warning on Tuesday, stating that a second round of US tariffs could potentially ignite "a full-blown trade war," which he labeled as the worst-case scenario for the global economy.

Impact of US Trade Policies

Speaking at the Spanish Banking Association, de Guindos highlighted the effectiveness of the ECB's data-driven monetary policy amidst ongoing uncertainties. However, he expressed concerns over the "worse than expected" impact of the new US administration's policies, pointing to declining government bond yields and a weakening dollar as indicators of market unease.

Shift Towards Global Economic Fragmentation

De Guindos emphasized that the current US trade stance signifies a fundamental shift in global economic dynamics, warning that "We are heading toward greater fragmentation of the global economy."