ECB Warns Foreign Tariffs Will Suppress Eurozone Inflation and Economic Activity

The European Central Bank warned on Tuesday that foreign import tariffs will lead to lower inflation and weaker economic activity across the euro area. This assessment coincides with reports that nations exporting to the United States are currently bearing the costs of trade barriers. In response to these economic shifts, French President Emmanuel Macron stated that Europeans must pursue reforms to strengthen their economic position against Washington and Beijing, characterizing recent U.S. trade pauses as a temporary "Greenland moment" rather than a lasting shift in policy.

Internal policy debates in France have intensified regarding the appropriate response to international trade pressure. The French High Commission for Strategy and Planning has proposed a blanket 30% tariff on all Chinese imports or a 20% to 30% depreciation of the euro against the yuan to protect local industry. However, French Finance Minister Lescure has distanced himself from these proposals, advocating instead for a "targeted approach" to address unfair competition while boosting European innovation and competitiveness.

President Macron warned that the United States is likely to impose new tariffs in the coming months if the European Union utilizes its Digital Services Act to regulate American technology firms. To counter these challenges, Macron advocated for "European preference" in trade and estimated that the EU requires approximately 1.2 trillion euros in annual public and private investment. He renewed calls for common borrowing through "Eurobonds" to fund expenditures in defense, security, and green technology, though this proposal has not yet gained broad support among the 27 member nations.