Europe must brace for possible US tariffs under a second Trump presidency: ECB’s Lagarde

Agencies | Brussels                                                      

The Daily Tribune – www.newsofbahrain.com

Europe should prepare for possible threats to its economy—including new US tariffs on its exports—if Donald Trump returns to the White House, European Central Bank President Christine Lagarde told CNN in an exclusive interview.

“If you look at what those years were when Mr. Trump was president of the United States, there could be threats and there could be issues for which the Europeans should be prepared,” she told CNN’s Richard Quest in an exclusive interview Monday.

“Let us prepare for potential tariffs and for potential harsh decisions that would be unexpected. Let us be strong at home.” Lagarde is the latest EU official to weigh in on what a second Trump presidency could mean for the European Union’s $16 trillion economy, which is heavily reliant on trade with the United States.

The transatlantic relationship was strained during Trump’s first term, not least by a tit-for-tat trade spat between Washington and Brussels. That dispute saw the United States impose tariffs on EU steel and aluminium, to which the EU responded with tariffs on $3 billion worth of US goods, including whisky, motorcycles, and denim.

Following Trump’s early success in the current Republican primaries, European officials are confronting the prospect that he could be back in the Oval Office by this time next year, an outcome with potential implications for everything from US trade policy to America’s financial support for Ukraine in the war against Russia.

The United States is the EU’s biggest source of foreign direct investment. Trade in goods and services between the United States and the EU totaled $1.3 trillion in 2022, making it the largest bilateral trade and investment relationship in the world, according to official figures.

From Lagarde’s perspective, the best way for Europe to prepare for a second Trump term would be to bolster its single market, which ensures the free movement of goods, services, people, and capital across 27 countries. That would mean integrating the EU’s financial markets to make it easier for smaller companies to raise funding “to facilitate and encourage innovation,” Lagarde said.

She also called for professional qualifications to be equally recognised across the bloc’s member states. “The benefit of being more (of) and really a single market is tremendous, and I think we have to just move in that direction. That’s how Europe moves, by the way, when it is under threat,” she added.