ECB Vice President Warns of Escalating Trade Tensions

In a stark warning, European Central Bank Vice President Luis de Guindos highlighted the potential for a second round of US tariffs to escalate into a "full-blown trade war," labeling it as the worst-case scenario for the global economy.

Impact of US Trade Policies

Speaking at the Spanish Banking Association, de Guindos pointed out that the new US administration's policies have had a more negative impact than anticipated, with markets reacting through falling government bond yields and a weakening dollar.

"We are heading toward greater fragmentation of the global economy," de Guindos stated, emphasizing the fundamental shift in the US trade stance.

ECB's Response to Uncertainty

Despite the challenges, de Guindos affirmed the effectiveness of the ECB's data-dependent monetary policy approach in navigating through significant uncertainty.