Christine Lagarde, the European Central Bank president, has called for European leaders to engage diplomatically with Donald Trump over tariffs by increasing purchases of US products, warning that an antagonistic trade war could devastate global economic growth.
The ECB chief’s remarks, made in her first interview since Trump secured his second presidential term, emphasised the need for negotiation rather than retaliation against the president-elect’s threatened 20 per cent tariff on non-Chinese US imports. Lagarde questioned the effectiveness of Trump’s ‘make America great again’ stance, highlighting that declining global demand would contradict such aims.
European officials in Brussels harbour serious concerns about the potential impact of Trump’s tariffs on the EU’s substantial trade surplus with the US. The European Commission is exploring various responses, including increased purchases of American agricultural products, liquefied natural gas, and defence equipment.
Lagarde advocates for what she terms a “cheque-book strategy,” suggesting that Europe should proactively offer to purchase specific American goods. She believes this approach would yield better outcomes than retaliatory measures that could spiral into a destructive cycle of economic countermeasures.
The EU is considering allowing US companies greater participation in military procurement initiatives funded by EU taxpayers. This strategic shift also includes potential alignment with Washington’s stance on China-related trade and geopolitical matters.
While acknowledging Europe’s economic challenges, Lagarde remains optimistic about the region’s capacity to regain competitiveness. She emphasised the urgency of implementing the Capital Markets Union, a long-standing initiative aimed at creating a single European market for capital, and called for centralised supervision similar to the US Securities and Exchange Commission model.
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