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," marking it as the most severe outcome for global economies.

The Impact of US Policies on Global Markets

Speaking at the Spanish Banking Association, De Guindos highlighted how the ECB's data-driven monetary policy has navigated through periods of high uncertainty. Yet, he expressed concerns over the "worse than expected" effects of the new US administration's policies, evident in the declining government bond yields and the dollar's weakening stance.

A Shift Towards Global Economic Fragmentation

De Guindos pointed out that the US's current trade approach signifies a fundamental change, steering the global economy towards increased fragmentation. "We are heading toward greater fragmentation of the global economy," he remarked, underscoring the potential long-term consequences of these trade tensions.