Lagarde said the ECB estimates that unilateral U.S. tariffs would hit the eurozone’s growth rate by 0.3 percentage points in the first year, and by as much as 0.5 percentage points if the EU retaliated in kind. Inflation could rise by 0.5 percentage points, she said.
Lagarde said the estimates are subject to “maximum uncertainty” due to the rapid pace of events and stressed that any barriers to trade would dampen growth. However, she added, the EU could offset that with deeper ties with other trade partners.
“Closer integration with the rest of the world, excluding the U.S., could more than offset losses from unilateral tariffs, including retaliation,” she said.
The central banker also addressed rumors of a so-called “Mar-a-Lago accord” that would aim to devalue the dollar to boost American manufacturing with the cooperation of U.S. allies.
Lagarde called the policy proposal, which has never actually been endorsed by the Trump administration in an official capacity, a “speculative unidentified arrangement” that “lacked substance.”
