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 wave of US tariffs could lead to "a full-blown trade war," a scenario he described as the most dire outcome for the global economy.

Impact of US Policies Worse Than Anticipated

Speaking at the Spanish Banking Association, de Guindos highlighted the effectiveness of the ECB's data-driven monetary policy amidst prevailing uncertainties. However, he pointed out that the new US administration's trade policies have had a "worse than expected" impact, evident in the declining government bond yields and the weakening dollar.

Global Economic Fragmentation on the Horizon

De Guindos emphasized that the US's current trade approach signifies a fundamental shift in global economic dynamics. "We are heading toward greater fragmentation of the global economy," he remarked, underscoring the potential for increased economic divisions worldwide.