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Trade War Warnings: Eurozone’s Central Bank Says Trump’s Tariffs Will Trigger Inflation and Interest Rate Spike

Economy Update – Analysis

A recent statement from a European Central Bank governor highlighted concerns over the economic ramifications of new tariffs imposed by U.S. President Donald Trump. The governor, Class Note, indicated that these customs duties are likely to trigger increased inflation and interest rates in the United States, which could in turn weaken the euro.

Note emphasized that “trade wars are detrimental to all parties involved, resulting in losses across the board.” He added that the optimal economic response to such tariffs would be to refrain from retaliation, although political pressures may compel countries to react differently.

He further asserted that Europe possesses significant economic strength as a robust trading bloc with 400 million consumers and is unlikely to stand idly by. However, he anticipates that nations will still respond primarily for political reasons.

On Saturday, President Trump announced new tariffs affecting key allies, including Canada and Mexico, as well as China. Specifically, Trump ordered a 25% tariff on imports from Mexico and Canada, with Canadian energy imports subject to a 10% fee, and 10% tariffs on goods imported from China starting Tuesday.

Regarding the potential fallout from these tariffs, Note remarked that U.S. prices will inevitably rise due to the imposed duties, leading to higher costs for American consumers and increased interest rates as a measure to control inflation.

“The impact is already observable in the movement of long-term interest rates,” he concluded.

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