Trump’s Trade War Is ‘Wake-up Call’ for Europe, Lagarde Says 

European Central Bank (ECB) President Christine Lagarde looks on as she speaks to the media following the Governing Council's monthly monetary policy meeting in Frankfurt, Germany, March 6, 2025. (Reuters)
European Central Bank (ECB) President Christine Lagarde looks on as she speaks to the media following the Governing Council's monthly monetary policy meeting in Frankfurt, Germany, March 6, 2025. (Reuters)
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Trump’s Trade War Is ‘Wake-up Call’ for Europe, Lagarde Says 

European Central Bank (ECB) President Christine Lagarde looks on as she speaks to the media following the Governing Council's monthly monetary policy meeting in Frankfurt, Germany, March 6, 2025. (Reuters)
European Central Bank (ECB) President Christine Lagarde looks on as she speaks to the media following the Governing Council's monthly monetary policy meeting in Frankfurt, Germany, March 6, 2025. (Reuters)

A full-scale global trade war would hurt the United States in particular and could re-energize Europe's push towards unity, European Central Bank President Christine Lagarde said on Friday.

The US has imposed a raft of tariffs on friends and foes alike and threatened even more measures, prompting retaliation from most and raising concern that global growth could take a major hit.

"If we were to go to a real trade war, where trade would be dampened significantly, that would have severe consequences," Lagarde told BBC's HARDTalk program. "It would have severe consequences for growth around the world and for prices around the world, but particularly in the United States."

However, these tensions could also have the positive side effect of giving European unity another push, Lagarde argued.

"You know what it's doing at the moment? Stirring European energy. It's a big wake-up call for Europe. Maybe this is a European moment, yet again," she said.

The European Commission and Germany, the bloc's biggest economy, have already announced increased spending on defense and infrastructure, ending years of reluctance to spend, Lagarde argued.

This "collective waking up" also appears to include the UK, which left the European Union, as it's taking part in Europe's security effort, Lagarde argued.

Many of the EU's large scale efforts to deepen unity have been stalled for the better part of the last decade and former ECB chief Mario Draghi delivered a scathing report on the European project last year.

Leaders, however, have taken few if any steps to implement Draghi's reform proposals, even as the bloc is barely growing now and Germany suffered two straight years to economic contraction.



IMF Eyes Revised Global Forecast, but Warns Trade Tensions Still Cloud Outlook

A hazy view of the skyline in Toronto, Ontario, Canada, July 14, 2025. REUTERS/Carlos Osorio.
A hazy view of the skyline in Toronto, Ontario, Canada, July 14, 2025. REUTERS/Carlos Osorio.
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IMF Eyes Revised Global Forecast, but Warns Trade Tensions Still Cloud Outlook

A hazy view of the skyline in Toronto, Ontario, Canada, July 14, 2025. REUTERS/Carlos Osorio.
A hazy view of the skyline in Toronto, Ontario, Canada, July 14, 2025. REUTERS/Carlos Osorio.

The International Monetary Fund warned on Friday that risks related to trade tensions continue to cloud the global economic outlook and uncertainty remains high despite some increased trade and improved financial conditions.

IMF First Deputy Managing Director Gita Gopinath said the fund would update its global forecast later in July given "front-loading ahead of tariff increases and some trade diversion," along with improved financial conditions and signs of continued declines in inflation.

In April the IMF slashed its growth forecasts for the United States, China and most countries, citing the impact of US tariffs on imports now at 100-year highs and warning that rising trade tensions would further slow growth.

At the time, it cut its forecast for global growth by 0.5 percentage points to 2.8% for 2025, and by 0.3 percentage points to 3%. Economists expect a slight upward revision when the IMF releases an updated forecast in late July.

According to Reuters, Gopinath told finance officials from the Group of 20 major economies who met this week in South Africa that trade tensions continued to complicate the economic outlook.

"While we will update our global forecast at the end of July, downside risks continue to dominate the outlook and uncertainty remains high," she said, in a text of her remarks.

She urged countries to resolve trade tensions and implement policy changes to address underlying domestic imbalances, including scaling back fiscal outlays and putting debt on a sustainable path.

Gopinath also underscored the need for monetary policy officials to carefully calibrate their decisions to specific circumstances in their countries, and stressed the need to protect central bank independence. This was a key theme in the G20 communique released by finance officials.

Gopinath said capital flows to emerging markets and developing economies remained sluggish, but resilient, in the face of increased policy uncertainty and market volatility. For many borrowers, financing conditions remained tight.

For countries with unsustainable debt, proactive moves were essential, Gopinath said, repeating the IMF's call for timely and efficient debt restructuring mechanisms.

More work was needed on that issue, including allowing middle-income countries to access the G20's Common Framework for Debt Restructuring, she said.