Trade Tensions: Eurozone Faces Economic Shakeup

Greek central bank governor Yannis Stournaras warns that U.S. President Donald Trump's tariff policies could slow euro area economic growth by 0.5 to 1 percentage points. The EU considers countermeasures as the region braces for potential negative impacts on growth and inflation. ECB's next move is eagerly awaited.

The euro area's economic stability is at risk due to U.S. President Donald Trump's tariff policies, according to Greek central bank governor Yannis Stournaras. In an interview with the Financial Times, Stournaras highlighted the potential slowing of economic growth by up to 1 percentage point if eurozone and U.S. trade tensions continue to escalate.

As the European Union deliberates on retaliatory measures targeting $28 billion worth of U.S. imports, it faces substantial tariffs on steel, aluminum, and automotive products. Stournaras warns that the impending global trade war could result in a significant 'negative demand shock,' potentially undermining Europe's economic prospects.

The European Central Bank is closely monitoring the situation, with estimates suggesting a 25% U.S. tariff on European imports might reduce eurozone growth by 0.3 percentage points, rising to 0.5 with EU counter-tariffs. Amidst these dynamics, the ECB's next interest rate decision is set for April 17, while eurozone inflation trends may prompt further action.

(With inputs from agencies.)