European Central Bank President Christine Lagarde on Thursday urged greater trade integration with the rest of the world to counter the economic fallout from escalating trade tensions between the U.S. and the European Union.
BRUSSELS, March 20 (Xinhua) -- European Central Bank (ECB) President Christine Lagarde on Thursday urged greater trade integration with the rest of the world to counter the economic fallout from escalating trade tensions between the U.S. and the European Union (EU).
During a hearing at the Committee on Economic and Monetary Affairs of the European Parliament in Brussels, Lagarde said that heightened trade frictions could slow eurozone growth by up to half a percentage point and drive up inflation.
The eurozone, which is highly open to trade and deeply integrated into global supply chains, particularly with the U.S., is "particularly exposed to shifts in trade policies," she noted.
According to ECB analysis, a 25-percent U.S. tariff on imports from Europe would reduce eurozone growth by approximately 0.3 percentage point in the first year, and if Europe retaliated, the decline could deepen to half a percentage point, Lagarde said.
While the most significant impact would be felt in the first year after the tariffs take effect, Lagarde cautioned that the negative effects on economic output could linger.
Lagarde noted that U.S. tariff policies are also likely to dampen investment and exports, potentially impacting the eurozone's economic outlook. The ECB's March forecast projected eurozone economic growth of 0.9 percent in 2025, 1.2 percent in 2026, and 1.3 percent in 2027.
"Crucially, the answer to the current shift in US trade policies should be more, not less, trade integration, both with trade partners around the globe and within the EU," she stressed. ■