ECB’s Villeroy: US Tariffs on Mexico, Canada ‘Will Have Very Negative Consequences’
3 February 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau said on Monday that new tariffs imposed by US President Donald Trump on Mexico and Canada would backfire on the US.
In an interview with French radio France Info, Villeroy, who heads the Banque de France, said that Trump’s recently imposed tariffs ‘will have very negative consequences, first of all for the American economy’.
Prices of many imported goods would increase in the US due to these tariffs, he said, and they would cause disruption in the automobile industry.
‘[I]t is therefore also bad for American growth’, he added.
There was a risk that this escalation in protectionism would spread to other territories like Europe, according to Villeroy.
Asked if the EU should retaliate in the event of a trade war, he said, ‘[w]e must wait and see what these increases are, and we must not rule out a response, because we must not be naïve or disarmed.’
However, the ‘heart’ of the European response should be to make its economy stronger, he indicated.
Passing the budget in France would be a ‘first step in the right direction’, according to Villeroy.
‘To start reducing this uncertainty, France needs a budget, and a budget that reduces the deficit’, he said. ‘From this point of view, what is presented is therefore going in the right direction.’
France would not become insolvent as international markets would keep lending money to the country, he said, but the problem was now related to increasing financing costs.
‘So we [French bond yields] have moved away from Germany, we are now above Spain, and we have moved closer to Italy’, he said.
Regarding the ECB’s monetary policy, Villeroy said that there would be more rate cuts and that this would spur economic growth.
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