ECB’s de Guindos: Trade Tensions Could Have a Detrimental Impact on Growth

21 May 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Vice President Luis de Guindos said on Wednesday that tariffs could have adverse effects on economic activity.

In a media briefing after presenting the ECB’s Financial Stability Review for May 2025, de Guindos said that ‘tariffs and trade disputes are now under development … we do not know what’s going to be the final outcome.’

They could have ‘a detrimental impact on growth’, he said.

Asked by Econostream if uncertainty coming from trade tensions could by itself significantly hit growth, de Guindos said that the uncertainty was having an impact on investment decisions by companies and major purchases by households.

‘So, even though we do not know what is going to be the final outcome, the level of uncertainty now is having a clear short-term impact on economic activity’, he said.

Present valuations were pricing in a ‘very benign scenario’ with no recession, according to de Guindos, who stated that such expectations were ‘right’ in the ECB’s view.

Inflation would keep declining, according to the EU Commission’s latest forecasts, which de Guindos described as a ‘correct’ scenario.

The assumption behind such forecasts was that trade tensions would not deal a severe blow to the global economy, he said, while stressing that there were some risks around these.

‘Well, these are assumptions, but there are risks that perhaps these assumptions will not take place’, he said. ‘I think they are reasonable assumptions, but valuations are very stretched, and they are very high.’