ECB’s Lagarde says uncertainty is back amid latest Trump threats

European Central Bank President Christine Lagarde said uncertainty has returned due to the latest tariff threats by Donald Trump.

Trust between the US and Europe is being undermined, Lagarde told CNN at the World Economic Forum in Davos, adding that firms in both regions are now struggling to work out the knock-on effect of new levies.

“What is more important than the tariffs themselves is the rising uncertainty that we are seeing again — so uncertainty is back,” she said in an interview broadcast Tuesday. She described the threats as a “movie we’ve seen before.”

Trump’s potential action against European countries could challenge the ECB’s benign outlook for inflation and economic activity over the coming years. While the euro zone has so far proved resilient to rising protectionism, officials have continuously highlighted that risks remain elevated.

Lagarde said policy in Europe has recently become “really predictable,” with inflation and benchmark borrowing costs both at 2%.

Indeed, interest rates have been on hold since June and neither investors nor economists expect further steps for now. Bank of France Governor Francois Villeroy de Galhau told Bloomberg TV earlier Tuesday that any new tariffs must be assessed, but added that he expects their influence on prices to be “muted.”

Lagarde highlighted that trade links between the US and Europe are “very deep.”

“To jeopardise that, to put that into question, is not conducive to good business policies,” she said. “Corporate America should be thinking about it, as Europe corporate is thinking about it.”

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