ECB President calls for avoiding trade confrontation between the EU and the US

Christine Lagarde warned that a trade war would lead to a decline in global GDP

European Central Bank President Christine Lagarde has called on EU political leaders to cooperate with US President-elect Donald Trump on trade duties and buy more American goods. She said this in an interview with the Financial Times.

Lagarde warned that a trade war is generally not in anyone’s interest and will lead to a reduction in global GDP. She urged EU leaders not to retaliate but to negotiate.

Trump promised to impose a 10-20% duty on imports of goods from all countries to the United States and a 60% duty on all imports from China. This has raised concerns that the EU’s trade surplus with the United States could be wiped out, and tariffs would push European manufacturers to move production there.

According to Christine Lagarde, the EU should follow a “checkbook strategy” in its relations with Trump, offering to buy goods, including American LNG and defense products.

“This is a better scenario than a retaliatory strategy, which could lead to an ‘eye for an eye’ confrontation with no winner,” she said.

EU officials are currently studying plans to increase European purchases of American goods, including LNG, defense equipment, and agricultural products.

The ECB chief also urged EU policymakers to monitor the potential for a “diversion scenario” in which U.S. tariffs on Chinese exports would lead to goods from China being diverted to Europe.

Lagarde said that the crisis currently facing Europe’s economy has also become a “great awakening.” She agreed with the recommendations of her predecessor Mario Draghi that the bloc needs to take decisive action to restore its economic competitiveness.

“Europe is lagging behind. But I would not say that Europe cannot catch up,” the ECB President said.

In October 2024, the ECB cut key interest rates for the third time in a year. Earlier, in June, the ECB raised its forecast for eurozone GDP growth in 2024 to 0.9% from 0.6% expected in March, but lowered it for 2025 to 1.4% from 1.5%.