Europe's top central banker says economy holding up better than expected in face of Trump tariffs DAVID McHUGHSeptember 30, 2025 at 10:30 PM 0 FILE President of the European Central Bank Christine Lagarde briefs the media during a press conference at the bank's headquarters in Frankfurt, Germany, Th...
- - Europe's top central banker says economy holding up better than expected in face of Trump tariffs
DAVID McHUGHSeptember 30, 2025 at 10:30 PM
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FILE - President of the European Central Bank Christine Lagarde briefs the media during a press conference at the bank's headquarters in Frankfurt, Germany, Thursday, Sept. 11, 2025. (AP Photo/Michael Probst, File)
FRANKFURT, Germany (AP) — Europe's economy is holding up better than expected in the face of U.S. President Donald Trump's new tariffs - in part because the European Union didn't retaliate with self-defeating tariffs of its own, the head of the European Central Bank said Tuesday.
Christine Lagarde said the impact of Trump's trade war on growth and inflation in the 20 countries that use the euro currency had also been softened by a stronger euro and by conclusion of a trade deal with Trump. The deal capped tariffs at 15% and took away uncertainty that threatened to delay or disrupt business investment.
"A year ago, most would have assumed that U.S. tariffs... would trigger a major adverse shock to the euro area economy," Large said in a speech delivered at a central banking conference in Helsinki, Finland. "Yet some of these assumptions have not been borne out."
There had been little impact on inflation, she said, and effects on growth have been "relatively moderate" due to European governments taking pro-growth measures in response.
The European Union's executive commission prepared a list of goods to hit with retaliatory tariffs, or import taxes, but suspended them once the tariff deal was struck between Trump and Commission President Ursula von der Leyen was struck in July. The reasons for nonretaliation included pressure from business groups not to get into a prolonged cycle of tit-for-tat tariff increases, as well as concerns about jeopardizing US support for Ukraine.
As a result, Europe was still getting the imported raw materials and goods that it needs for its economy without hindrance from high tariff cost or bottlenecks that could raise prices. "As a result, we have not yet seen significant supply chain disruption," Lagarde said. "Global supply chain pressures remain contained, and in the euro area, bottleneck indicators are close to historical averages."
Trump's policies have been accompanied by a fall in the dollar and a correspondent strengthening of the euro. That makes Europe's imports cheaper and helps the ECB in its efforts to contain the annual rate of inflation, which was a moderate 2% in August.
The EU and member governments have taken other measures to strengthen growth, such as free trade deals with the South American Mercosur countries - Argentina, Brazil, Bolivia, Paraguan and Uruguay - and with Mexico. National governments have ramped up defense spending due to the perceived threat from a newly aggressive Russia, while Germany has committed to large-scale investment in roads, rails and bridges after years of underspending.
Nonetheless, growth remains mediocre, coming in at only 0.1% in the second quarter over the quarter before. Tariffs and the associated uncertainty will still knock some 0.7% percentage points off through 2025 and 2027.
Source: "AOL AOL General News"
Source: CR MAG
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