Trump tariffs should start ‘march to independence’ for Europe, says ECB chief Lagarde

U.S. President Donald Trump’s imposition of tariffs on the EU should be the start of a “march to independence” for the continent, European Central Bank President Christine Lagarde said Monday.

In an interview with France Inter days before the U.S. president’s 25 percent tariff on automobile imports and broader “reciprocal” tariffs are due to enter force, Lagarde said the moment represented a unique opportunity for Europe, and that it should not “lie down” in front of the U.S. onslaught.

“I consider it a moment when we can decide together to take our destiny into our own hands, and I think it is a march to independence,” she argued, adding that this applied to the fields of finance and information technology as much as to defense and energy. 

Lagarde acknowledged again that Trump’s trade war is likely to hurt the economy in the immediate future, repeating the ECB’s estimate that it could take as much as 0.5 percent off gross domestic product if Europe retaliates against the U.S. measures. The European Commission has indicated it will prepare a response to the measures within two weeks.

“I think that, to put ourselves in a good negotiating position, we must show that we’re not ready to lie down,” she added.

She also highlighted the consequences that Trump’s measures will have for the U.S., where consumer and business confidence has fallen sharply as what were previously considered negotiating tactics suddenly are now on the verge of becoming reality.

“U.S. automakers are tearing their hair out today trying to work out how they can carry on operating,” she said, with reference to the deep integration in the U.S. supply chain with Mexico and Canada, whose component industries have only received partial exemptions from the planned tariffs. Analysts argue that such factors will drive up car prices in the U.S. and could be compounded if domestic manufacturers see the loss of foreign competition as an opportunity to bolster their own profit margins.

Trump told NBC at the weekend that he “couldn’t care less” if U.S. automakers raise their prices, since he expected the final result to be that the U.S. would buy more home-produced cars.

Elsewhere in the interview, Lagarde warned that the high degree of uncertainty created by the trade war means it’s impossible to say that the ECB has won its battle against inflation, which is still slightly above the Bank’s medium-term target of 2 percent.

“You can’t say ‘it’s over, it’s behind us’ because, unfortunately, we have heaps of uncertainty, and when Mr. Trump suddenly decides to increase tariffs on the automobile sector to 25 percent, or to impose reciprocal tariffs from April 2, that inevitably changes things,” Lagarde said.

The ECB’s Governing Council in recent days has appeared split over whether or not to carry on cutting interest rates at its next policy meeting on April 17. 

“We are nearly at target, but we have to stay there,” Lagarde said.

Lagarde also showed that she still isn’t convinced by those arguing for the seizure of over €200 billion in Russian state assets frozen in European clearinghouses and depositaries. She stressed that the assets are already being used as collateral for loans to Ukraine from G7 countries.

“Confiscation is another story, because if we insist on the application of international law, we have to respect international law ourselves,” she argued.

Violating that principle, she suggested, would risk blowing a rare opportunity for Europe to present itself as a safe place for investment, at a moment when Trump’s efforts to expand presidential authority over the judicial system are raising questions in investors’ minds over the rule of law in the U.S.

(This story has been updated.)