The European Central Bank cut its main interest rate by a quarter of a percentage point Thursday, citing growing trade tensions after US President Donald Trump’s tariffs sparked a global trade war.
While the 20 countries that use the euro have built up “resilience against global shocks,” the “outlook for (economic) growth has deteriorated owing to rising trade tensions,” the ECB said in a statement.
The central bank is one of a number of global economic and financial players to warn that tariffs could weigh on economies and hurt everyone from major corporations to regular people. Similar warnings have been issued by the International Monetary Fund, the World Trade Organization, US Federal Reserve Chair Jerome Powell and others.
Speaking to reporters, ECB President Christine Lagarde said: “Disruptions to international commerce, financial market tensions and geopolitical uncertainty are weighing on business investment. As consumers become more cautious about the future, they may pull back on spending.”
The ECB’s rate cut to 2.25%, which was widely expected, is the seventh in the past year.
Yael Selfin, chief economist at consultancy KPMG, said the trade war – which has featured a flurry of tariffs, pauses, new tariffs and more delays – could lead to a pile-up of products as trade flows get snarled.
