Nagel: Trump's Proposed Tariffs May Trigger Higher Inflationary Pressures

Forex - Joachim Nagel, President of the Bundesbank and member of the ECB Governing Council, stated that the tariffs proposed by Trump could disrupt international trade and threaten higher inflationary pressures. Nagel argued that a moderate decline in globally integrated trade would have only a small impact on inflation, but a sudden and sharp increase in trade restrictions such as tariffs could change the situation dramatically. He said, “If a country significantly raises tariffs and affected countries retaliate, we could see a substantial increase in inflationary pressures.”

Trump's proposals during his presidential campaign included tariffs of up to 20% on all imported goods, and up to 60% on goods from China. Nagel noted, “If the new U.S. administration turns these promises into reality, it could be a significant turning point for the international trading system.” However, he mentioned that central bankers, including policymakers from the European Central Bank, have tools at their disposal, such as higher interest rates, to control inflation in the Eurozone in response to this decline in global integration. Nevertheless, economic growth is likely to be lower as firms utilizing international labor would lose some benefits. Nagel added, “The world, once characterized by multilateralism and global cooperation, is slowly shifting towards conflict and fragmentation.”