ECB’s Lagarde: US Tariff Impact More Disinflationary If No European Retaliation

23 April 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank President Christine Lagarde said on Wednesday that US tariffs could have a disinflationary impact in Europe.

In an interview with the Washington Post, Lagarde said that it was ‘very unclear what the net impact [of US tariffs] will be’ on European inflation.

The effect could be disinflationary were Europe not to retaliate, she said.

‘In particular, if there are no countermeasures decided by Europe, I think the net inflation outcome is uncertain at the moment, but it is probably going to be disinflationary more than inflationary’, she said.

However, the uncertainty was high and the estimation of the inflationary impact was always subject to the time period in which the situation was assessed, Lagarde noted.

On one hand, ‘China will have overcapacity and will want to reroute its exports somewhere, possibly to Europe, and that would have a dampening impact on prices’, she said.

On the other hand, higher defence and infrastructure spending by European countries like Germany could have an inflationary impact, according to Lagarde.

‘It’s a balancing act, it’s one where you have to take a short and a longer term view and where the net impact is uncertain as far as Europe is concerned’, she added.