AsianFin -- ECB President Christine Lagarde urged the European Union to engage in negotiations with the U.S. over potential trade tariffs, rather than resorting to immediate retaliation.
In an interview with the Financial Times published Thursday, Lagarde emphasized that the EU's past approach was focused on negotiation rather than retaliation. "We seem to lean more towards what I would call a checkbook strategy," she said, recalling that the EU's previous strategy was "not to retaliate, but to negotiate."
Lagarde reiterated her concerns about the damaging effects of a full-scale trade war, suggesting that Europe could offer to purchase certain goods from the U.S. as a gesture to open dialogue and explore potential collaboration. "I think this is a better scenario than a pure retaliation strategy, which could lead to a tit-for-tat cycle where no one truly wins," she added, according to an ECB transcript.
Lagarde's comments come amid continued trade threats from U.S. President-elect Donald Trump, who campaigned on a platform of tariffs.
“When you start considering a trade war, you can quickly see an escalation, which, in my view, is a net negative,” Lagarde warned. "This would be detrimental to everyone, including the U.S., Europe, and the global economy. It would lead to a reduction in global GDP."
While Lagarde said it was too early to estimate the full impact of the tariffs threatened by Trump, she noted, "If anything, it might be slightly inflationary in the short term."