ECB’s de Guindos: Higher Tariffs Disinflationary in Short Term, but Fragmentation Could Reverse This

26 November 2025

By Marta Vilar – MADRID (Econostream) – European Central Bank Vice President Luis de Guindos said on Wednesday that the full impact of higher tariffs had yet to materialize with a disinflationary effect in the short term that would be pushed in the opposite direction in the long term due to fragmentation.

Presenting the ECB’s Financial Stability Review, de Guindos said the ECB’s view was that “in the short term higher tariffs are going to be disinflationary and simultaneously they are going to depress growth,” but that “in the medium or longer term that situation could change because of fragmentation,” which could raise business costs and generate inflationary pressure.

He added that the ECB would also need to take the US-China trade agreement into account, noting that Chinese goods—now more competitive thanks to lower domestic prices and a weaker renminbi—could be redirected to Europe if the US increased tariffs.

Asked about high valuations in the AI sector, de Guindos said the situation did not resemble the dot-com bubble.

“Here we have companies with very clear business plans, with high revenues, with an evolution of revenues that is positive,” he said. “You can have doubts about valuations, but I think that to say that there is a bubble … would not reflect the real perspective we have on that.”

On bond markets, de Guindos said the profile of European bond investors had become more volatile and more sensitive to yield movements, with a greater focus on short-dated rather than long-term bonds.

A rise in yields or a steepening of the curve was one risk the ECB had to consider, he said, adding that market corrections could occur given the level of leverage and elevated valuations.