FRANKFURT (Reuters) – Import tariffs expected to be implemented by the administration of U.S. President-elect Donald Trump could lower economic growth and inflation in the 20 nations sharing the euro, European Central Bank board member Piero Cipollone said on Tuesday.
Most economists agree that the possible tariffs would impact growth, though views diverge on the effect on consumer prices.
Some argue the U.S. trade barriers will push up the value of the dollar, making imports of key commodities more expensive, while likely retaliation from Europe will also raise costs.
Cipollone, speaking in a pre-recorded interview at a financial conference, took the opposing view.
“All this put together makes me think that we will have a reduction in growth but also a reduction in inflation,” he said.
This argument is increasingly relevant since some of the more dovish members of the ECB’s rate-setting Governing Council have been saying that the bank was now at risk of undershooting its 2% inflation target and should therefore cut rates more quickly.
Cipollone said that U.S. tariffs would weaken the economy, which translates into lower consumption and thus reduced pressure on prices.
Meanwhile, Chinese producers shut out of the U.S. market would be looking for new buyers, selling in Europe at discounted prices.
While oil imports could be more expensive given a stronger dollar, Trump also wants to support U.S. energy production, which could mean greater supply just as overall growth cools.
These factors will then more than offset the inflationary impact on prices.