The European Central Bank (ECB) chief called for negotiation rather than retaliatory measures, calling for European political leaders to cooperate with U.S. President-elect Donald Trump, warning that an acrimonious trade war risks wiping out global economic growth.
ECB President Christine Lagarde has warned against taking retaliatory measures in response to potential new tariffs imposed by Trump, in an interview with the Financial Times newspaper published on Thursday.
Lagarde reiterated warnings about the consequences of a possible trade war with the U.S.. By offering to purchase goods from the U.S., the Europeans could signal their readiness to negotiate and explore possibilities for cooperation.
"We could offer to buy certain things from the United States and signal that we are prepared to sit at the table and see how we can work together," Lagarde said, according to a transcript of her interview published by the ECB and the newspaper.
"This is a better scenario than a pure retaliation strategy, which can lead to a tit-for-tat process where no one is really a winner," the ECB head told the FT.
She argued that such a "cheque-book strategy" was preferable to a purely retaliatory approach, suggesting these goods could be liquefied natural gas (LNG) and defense equipment.
The European Commission, which runs trade policy for the EU’s 27 member states, is still considering how it would respond.
European Commission President Ursula von der Leyen earlier this month also suggested that the European Union may consider replacing Russian liquefied natural gas imports with supplies from the United States.
At the time, she said the EU approach to trade policies implemented when Trump takes power again as U.S. president in January will be to engage, look at common interests and negotiate.
A trade war at large would be "in nobody's interest, neither for the United States nor for Europe, or anyone for that matter," the ECB chief added.
Lagarde said her thinking on how to handle a second Trump term had "changed a bit" over the course of 2024, saying it was also Europe’s responsibility to use the U.S. election result to spur much-needed changes to an economy that was struggling to keep up with its rivals.
She also noted it was too early to assess the implications of U.S. tariffs on the eurozone inflation and added that, if anything, it would be " a little net inflationary in the short term."
"It depends on what the tariffs are, what they are applied on and over what period of time," she said.
The interview was conducted on Monday before Trump announced his intention on Tuesday to impose tariffs of 25% on all imports from Mexico and Canada on his first day back in office. Trump's inauguration is due to take place on Jan 20.
Throughout his election campaign, Trump had generally announced far-reaching tariffs, arguing that this would lead U.S. companies to increase domestic production and thereby create jobs.