Trump's tariffs could hit European growth and inflation, says ECB's Cipollone (#1683540)

Import tariffs expected to be implemented by US President-elect Donald Trump's administration could reduce economic growth and inflation in the 20 countries that share the euro, Piero Cipollone, a board member of the eurozone, said on Tuesday. European Central Bank.

Most economists agree that potential tariffs would hurt growth, although opinions diverge on the effect on consumer prices.

Some argue that US trade barriers will push up the value of the dollar, making imports of key raw materials more expensive, while likely retaliation from Europe will also raise costs.

Cipollone, speaking in a prerecorded interview at a financial conference, took the opposite view.
“All this together makes me think that we will have a reduction in growth but also a reduction in inflation,” he said.

This argument is increasingly relevant as some of the more moderate members of the ECB's rate-setting Governing Council have been saying that the bank was now at risk of missing its 2% inflation target and therefore , should cut rates more quickly.

Cipollone said U.S. tariffs would weaken the economy, resulting in lower consumption and therefore less pressure on prices.

Meanwhile, Chinese producers excluded from the US market would look for new buyers and sell in Europe at reduced prices.

While oil imports could be more expensive due to a stronger dollar, Trump also wants to support U.S. energy production, which could mean more supply just as overall growth cools.
These factors will then more than offset the inflationary impact on prices.