A full-scale global trade war would hurt the United States in particular and could re-energise Europe’s push towards unity, European Central Bank President Christine Lagarde says.
The US has imposed a raft of tariffs on friends and foes alike and threatened even more measures, prompting retaliation from most and raising concern that global growth could take a major hit.
“If we were to go to a real trade war, where trade would be dampened significantly, that would have severe consequences,” Lagarde told BBC’s HARDTalk program.
“It would have severe consequences for growth around the world and for prices around the world, but particularly in the United States.”
However, these tensions could also have the positive side effect of giving European unity another push, Lagarde said.
“You know what it’s doing at the moment? Stirring European energy. It’s a big wake-up call for Europe. Maybe this is a European moment, yet again,” she said.
The European Commission and Germany, the bloc’s biggest economy, have already announced increased spending on defence and infrastructure, ending years of reluctance to spend, Lagarde argued.
This “collective waking up” also appeared to include the UK, which left the European Union, as it took part in Europe’s security effort, Lagarde said.
Many of the EU’s large-scale efforts to deepen unity have been stalled for the better part of the last decade and former ECB chief Mario Draghi delivered a scathing report on the European project in 2024.
Leaders, however, have taken few if any steps to implement Draghi’s reform proposals, even as the bloc is barely growing now and Germany suffered two straight years to economic contraction.
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