ECB’s de Guindos: Even If Trade Tensions Ease, High Uncertainty Likely to Drag Growth

15 May 2025

ECB’s de Guindos: Even If Trade Tensions Ease, High Uncertainty Likely to Drag Growth
Luis de Guindos, vice president of the European Central Bank, at the ECB Forum on Central Banking in Sintra, Portugal on July 2, 2024. Photo by the ECB under CC BY-NC-ND 2.0.

By Marta Vilar – MADRID (Econostream) – European Central Bank Vice President Luis de Guindos said on Thursday that even with a potential easing of trade tension, elevated uncertainty would likely dampen economic activity.

In a speech at the International Swaps and Derivatives Association (ISDA) Annual General Meeting in Amsterdam, de Guindos said that ‘even if trade tensions subside, this period of high uncertainty is very likely to have led to precautionary actions by firms and households, which could act as a drag on growth.’

If trade tensions were to trigger some vulnerabilities in the corporate sector and companies start downsizing their staff, this could hit employment and consumption, he said.

‘[R]isks to growth resulting from trade tensions combined with higher defence spending may limit the fiscal space available to shield the economy from adverse shocks’ and other spending for other purposes like climate change, digitalisation, ageing population and enhancing productivity, he said.

‘Rising trade tensions pose particular risks to the open euro area economy that is deeply integrated into global supply chains’, he said. ‘In this highly uncertain and volatile environment, the likelihood of tail events remains high.’

 

Related articles: