Lagarde Warns of U.S.-EU Trade War Impact

European Central Bank President Christine Lagarde has warned that a trade war driven by increased U.S. tariffs on European imports could negatively impact eurozone growth and inflation. A proposed 25% U.S. tariff could lower eurozone GDP growth by 0.3 percentage points, with potential EU retaliatory measures raising this to about 0.5 percentage points. Such tariffs are expected to push inflation up by half a percentage point, complicating the ECB's efforts to stabilize prices while potentially sparing a direct response in terms of interest rate hikes. Lagarde emphasized that while the inflationary pressures might fade over time, the immediate impact would be significant, affecting global supply chains and costs. The current geopolitical trade tensions, particularly with the U.S. under the Trump administration, are adding to global economic uncertainty. The ECB remains committed to its medium-term inflation target of 2%, suggesting a cautious, data-dependent approach to monetary policy decisions.