European Central Bank President Christine Lagarde said on Friday that the European Union could offset the impact of US trade tariffs if it removed some of its internal barriers. According to Reuters, Lagarde said that the European Union’s export-oriented economic model has been turned upside down due to the protectionist shift at the global level, from trade tariffs imposed by US President Donald Trump to China’s control over rare earths.
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She said the bloc could boost its fortunes if it made trade between its 27 members easier, citing the Netherlands as a good example. “Our analysis shows that if all EU countries lowered their barriers to the same level as the Netherlands, internal barriers could fall by about 8 percentage points for goods and 9 percentage points for services,” Lagarde said at a conference in Frankfurt.
“If we do just a quarter of that, it will be enough to boost internal trade enough to fully offset the impact of US tariffs on growth,” she added. Lagarde has incorporated wide-ranging economic reforms, from harmonizing value-added taxes to creating EU-wide corporate law, and has even proposed structural changes to the bloc’s functioning, such as the selection framework known as the “28th Order.”
Lagarde also praised fiscal spending, especially in Germany, to support the economy and said the European Central Bank, which cut interest rates sharply in 2024-25, would do its part. “We will continue to adjust our policy as needed to ensure inflation remains at our target,” Lagarde said.
Source: Market intelligence platform IndexBox
