European Central Bank officials: US tariffs may trigger anti-inflation effects in the Eurozone, US dominance may shift to a multipolar system.

On April 29, European Central Bank Executive Board member Chipolone said that U.S. trade measures may drag down inflation in the euro area in the short term, as they will drag down the global economic expansion. “The short- to medium-term impact could lead to a decline in eurozone inflation, as real interest rates in the eurozone have risen and the euro has appreciated since the US announced tariffs,” Chipolone said on Tuesday. “Trade measures could create the same inefficiencies as in the 20th century by shifting resources from high-productivity sectors to low-productivity sectors, and this contractionary effect could lead to a sustained decline in global growth rates.” Since Trump’s tariff announcement, the strengthening of the euro may have been the biggest surprise for policymakers. They had expected the euro to depreciate, raising the cost of imports, and that EU countermeasures could push up inflation. “The eurozone has benefited from safe-haven inflows, with the euro appreciating while nominal bond yields have fallen,” Chipolone said. He also raised the possibility that trade fragmentation could lead to a “gradual transition from a U.S.-dominated global system to a more multipolar one, where multiple currencies compete for reserve status.”