Under the Impact of Trump's Tariffs, ECB Official Warns: The Worst-Case Scenario Is Becoming a Reality

Jose Luis Escriva, a member of the European Central Bank's Governing Council and Governor of the Bank of Spain, stated that the economic environment currently faced by the European Central Bank is that some of the worst-case scenarios previously envisioned are becoming reality.

Escriva warned in an interview with the media that US President Trump's tariff policies are having a "very significant negative impact" on economic activity.

He pointed out that the aggressive policies of the US government could shake the status of the US dollar as a reserve currency and a safe-haven asset.

Trump's so-called reciprocal tariffs on more than 180 countries officially took effect last Wednesday local time.

Escriva stated that the specific impact of the "reciprocal tariffs" and a series of measures that took effect on Wednesday "remains uncertain," but monetary policymakers "are closely monitoring" the situation.

He emphasized that the impact of these tariffs on inflation in the eurozone "will depend on multiple factors, including whether Europe will implement trade countermeasures or adopt more expansionary fiscal policies."

As of press time, EU member states voted on the 9th to pass the first round of counter-tariff measures against the US, imposing tariffs of up to 25% on a range of US products. This round of countermeasures primarily targets US steel and aluminum tariffs. The EU's countermeasures will be implemented in phases, with the first round taking effect on April 15. It is understood that the first round of countermeasures involves goods worth approximately 21 billion euros.

The European Central Bank will announce its latest interest rate decision on April 17, and the market widely expects policymakers to cut interest rates by 25 basis points, lowering the deposit rate to 2.25%. This will be the seventh interest rate cut by the European Central Bank since June last year.

In the interview, Escriva did not express his personal views on next week's interest rate meeting.

Escriva believes that international investors may reassess the global role of the US dollar. He stated that over the past few decades, the US economy, the US dollar, and its financial markets have played a central role because multilateral agreements and trade rules have facilitated global trade flows.

"Now, economic actors and governments around the world are reassessing the impact of the latest US policies, and it is questionable whether some of these factors can continue to play such an important role globally," he said.

Escriva stated that the euro could become a more attractive alternative. "We can offer a large economy and a stable currency, whose stability and predictability stem from sound economic policies and the rule of law," he said.