ECB’s Lagarde: Trade Agreement with US ‘Well Below the Severe Scenario’
20 August 2025

By David Barwick – FRANKFURT (Econostream) – European Central Bank President Christine Lagarde on Wednesday said that the trade deal between the US and Europe was much less negative than the severe scenario of the ECB’s last macroeconomic forecasts.
In remarks for delivery at the International Business Council of the World Economic Forum in Geneva, Lagarde said that the effective average US tariff on European goods resulting from the trade agreement was between 12% and 16%.
‘This effective average tariff is somewhat higher than – but still close to – the assumptions used in our baseline projections last June’, she said. ‘It is worth noting that the outcome of the trade deal is well below the severe scenario for US tariffs of over 20% for euro area goods envisaged in the June projections.’
Still, pending determination of the ultimate tariffs to be applied to certain sectors, uncertainty remained, she said.
The ECB’s next projection exercise would take into account the meaning of the trade deal for Eurozone economic developments, and the result would ‘guide our decisions over the coming months’, she said.
‘While the United States is – and will remain – an important trading partner, Europe should also aim to deepen its trade ties with other jurisdictions, leveraging the strengths of its export-oriented economy’, she said.
In general, the global economy faced ‘challenging’ circumstances, but had remained resilient, albeit chiefly due to frontloading, she said. This had led to stronger-than-expected growth in Europe at the start of the year, she said.
However, this effect was in the process of unwinding, driving the 2Q growth slowdown, she said.
European activity had also benefited from higher private consumption and investment and a continued robust labour market, she said
‘Looking ahead, according to the Eurosystem’s June projections, growth is expected to slow in the third quarter as frontloading unwinds’, she said. ‘The recent trade deal agreed between the European Union and the United States imposes higher tariffs on euro area goods relative to the US tariff regime before April.’