U.S. President-elect Donald Trump’s proposed tariffs could disrupt international trade but are likely to have only a “minor impact” on inflation, according to European Central Bank policymaker Joachim Nagel.
Trump emphasized tariffs as a core part of his campaign, raising concerns among analysts about a potential repeat of the 2018-2019 U.S.-China trade war under the previous Republican administration.
Nagel, who also serves as President of the Bundesbank, referenced empirical studies indicating that the impact of global integration on domestic prices is “economically small.”
“While the direction of this impact is clear, its magnitude appears to be minor,” Nagel stated during a conference in Tokyo. “For global integration to significantly drive inflationary pressures, it would need to decline substantially. So far, this has not been the case.”
He further noted that if geoeconomic fragmentation were to intensify and contribute to higher inflation, central banks, including the ECB, could counteract it through increased interest rates.
