ECB Vice President Warns of Escalating Trade Tensions

European Central Bank Vice President Luis de Guindos issued a stark warning on Tuesday, suggesting that a second round of US tariffs could escalate into "a full-blown trade war," a scenario he described as the worst possible outcome for global economies.

Impact of US Policies on Global Economy

Speaking at the Spanish Banking Association, de Guindos highlighted the effectiveness of the ECB's data-driven monetary policy in navigating through periods of significant uncertainty. However, he expressed concerns over the "worse than expected" impact of the new US administration's policies, evidenced by declining government bond yields and a weakening dollar.

Shift Towards Global Economic Fragmentation

De Guindos emphasized that the current US trade stance marks a fundamental shift in global economic dynamics, warning that "We are heading toward greater fragmentation of the global economy." This shift, he argued, could have far-reaching implications for international trade and economic stability.