ECB’s Lagarde: ‘All Countries’ Should Adjust Their Trade Policies to Reduce Tensions

11 June 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank President Christine Lagarde said on Wednesday that all countries should adapt their structural and fiscal policy in a way that reduces their role in triggering trade tensions.

In a speech at the People’s Bank of China in Beijing, Lagarde said that ‘coercive trade policies are not a sustainable solution to today’s trade tensions.’

After the pandemic and national security issues, countries would maintain ‘a certain degree of de-risking’, she said, as fewer countries remained willing to stay dependent on others in key industries.

‘All countries should examine how their structural and fiscal policies can be adjusted to reduce their own role in fuelling trade tensions’, she said.

The use of policies that enhance domestic capacity with subsidies and alter global trade had more than tripled since 2014, according to Lagarde.

‘Notably, this trend is now being driven as much by emerging markets as by advanced economies’, she said. ‘In 2021, domestic subsidies accounted for two-thirds of all trade-related policies in the average G20 emerging market, consistently outpacing the share seen in advanced G20 economies.’

Growing current account positions were also another perception of unfairness in trade, according to Lagarde.

These surpluses and deficits were not ‘inherently problematic’ when they are explained by structural factors but become controversial when they are a long-term issue, she said.

In this situation, it is believed that these current account positions ‘are being sustained by policy choices – whether through the blocking of macroeconomic adjustment mechanisms or a lack of respect for global rules’, she said.

‘Coercive’ policies in trade were more likely to trigger retaliation and mutually harmful outcomes, she said.

‘Of course, none of us can determine the actions of others. But we can control our own contribution’, she said.