Rolling coverage of the latest economic and financial news
Wall Street and bitcoin soar to record highs as Trump wins US election
Donald Trump’s election victory and the threat of tariffs will force policymakers to be more cautious as they bring down interest rates, the European Central Bank’s vice president Luis de Guindos has said.
De Guindos said the heightened uncertainty following Trump’s recapture of the White House meant the threat of trade tariffs could be added to the uncertainty created by the war in Ukraine and the middle east conflict.
It is huge. And because of that you need to be prudent.
What we will do is we will incorporate into our projections the trade policy that is announced by the new US administration. And we will take into consideration all the elements. Trade policy, plus the evolution of demand, plus the evolution of energy prices.
It’s quite clear that inflation is a tax the low income people, because it’s quite clear that they consume the large part of their incomes. And they consume the kind of items where prices have been rising the most.
And even though you know it’s clear that the inflation rate is declining, households and consumers, look at prices that are 20% or 30% higher than two years ago.
We assume that Trump will initially impose only selective but headline-grabbing tariffs, while threatening to go much further if China and Europe do not offer him significant concessions in negotiations. That would be akin to his approach in 2017-20.
Viewed in isolation, such an escalation of trade tensions could lower 2025 growth in the Eurozone by c0.3 percentage points and in heavily exposed Germany by as much as c0.5 percentage points as uncertainty weighs on business confidence and investment.
