Christine Lagarde, President of the European Central Bank (ECB), said on Wednesday that the recent trade deal with the U.S. was not far from the bank’s baseline forecast. She also noted that the trade negotiations led to higher tariffs on EU goods to the U.S. than the April levies.
At the International Business Council of the World Economic Forum, Lagarde revealed that the recent trade deal established tariffs between 12% and 16% for U.S. imports of EU goods. She believes the 15% levies on most items in the deal agreed upon last month prevented an all-out trade war and gave businesses greater clarity.
The bank’s official said the tariffs were still higher than the ECB’s June baseline projections.
Lagarde says U.S.-EU trade deal will weigh on economic growth.
The ECB’s president acknowledged that the trade deal is also below the worst-case scenario for U.S. tariffs. The financial institution had projected over 20% of U.S. tariffs on EU goods in its June projections.
Lagarde believes the deal between the two nations will weigh on economic growth until 2026. The financial institution’s June forecast shows a baseline 1.1% economic growth next year. It also revealed that severe outcomes would have lowered the growth to 0.7%.
According to Europe’s central bank, there’s still uncertainty lurking due to unspecified levies in pharmaceuticals and semiconductors. As previously reported by Cryptopolitan, the 15% trade deal did not include pharmaceuticals.
Lagarde said the ECB’s staff will reveal the implications of the U.S.-EU trade deal for the European economy in the upcoming September projections. She also stated that next month’s projections will guide the European Central Bank’s decisions over the coming months.
Lagarde argued that the EU had a strong track record of trading partners, with 72 countries engaging in trade. She also said the region has the largest network of trade agreements globally.
The ECB president said that global growth remained steady despite the challenging juncture in the global economy due to recent trade tensions. She believes that U.S. trade policy disruptions have led to continued economic growth.
Q1 frontloading leads to stronger-than-expected economic growth
Lagarde said the increase in inventories in Q1 due to tariff uncertainty led to stronger-than-expected growth for the period. According to the International Monetary Fund, growth from January to March was 0.3% higher than it had forecast back in April. The firm noted that international trade and investments drove most of the activity in the quarter.
The ECB said there’s still global uncertainty driven by U.S. tariffs despite an increase in recent trade deals. It also revealed that one index of global trade policy uncertainty dropped by roughly 50% from its peak in April, but remains well above its historical average.
The financial institution also noted that the EU’s economy remained resilient this year in the wake of heightened U.S. trade policies. ECB said global frontloading early in the year benefited much of Europe’s export-oriented economy.
According to the ECB, the pharmaceutical sector saw strong output growth from January to March. It also noted that the effect is currently reversing due to the implementation of tariff hikes. The bank said the expected slowdown in EU economic growth was already evident in Q2.
According to Europe’s central bank, strong private consumption and investment have also contributed to economic growth in 2025. It also noted that the labor market remained strong, with the EU reporting a 6.2% unemployment rate in June.
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Source: https://www.cryptopolitan.com/ecbs-lagarde-u-s-eu-trade-deal-projections/
