According to Odaily, European Central Bank board member Fabio Panetta expressed concerns that US trade measures could negatively affect eurozone inflation in the short term by hindering global economic growth. On Tuesday, Panetta stated that the impact could lead to a decrease in eurozone inflation rates, as real interest rates in the region have risen and the euro appreciated following the US announcement of tariffs.
Panetta noted that these trade measures could shift resources from high-productivity sectors to low-productivity sectors, which could create inefficiencies similar to those observed in the 20th century. This contraction effect could lead to a prolonged decline in global growth rates. Since US President Donald Trump announced the tariffs, the strengthening of the euro has been an unexpected development for policymakers, who anticipated a depreciation that would increase import costs and, combined with countermeasures from the EU, could potentially drive up inflation.
Panetta emphasized that the eurozone has benefited from capital inflows as a safe haven, which has led to the appreciation of the euro and a decrease in nominal bond yields. He also suggested the possibility of trade diversification leading to a gradual transition from a US-dominated global system to a more multipolar system, where multiple currencies compete for reserve status.