European Central Bank President Christine Lagarde said uncertainty has returned to global trade as U.S. President Donald Trump signals new tariff threats against Europe. Speaking at the World Economic Forum in Davos, Lagarde told CNN that trade tensions now hurt trust between Europe and the United States.
She said companies on both sides of the Atlantic now face renewed questions about costs, planning, and investment as tariff signals continue to shift.
Lagarde said the uncertainty tied to tariff threats harms the economy more than the tariffs themselves. She explained that repeated changes make business decisions harder across Europe and the United States.
Firms are now assessing how higher import costs could affect prices, supply chains, and growth. As a result, planning cycles grow shorter and confidence weakens. Lagarde noted that Europe and the United States share deep trade links built over decades. These ties include goods trade, investment flows, and job creation through cross-border cooperation.
She warned that risking these links does not support sound business policy. Leaders, she said, should weigh consequences before acting.
Is Europe prepared for a new phase of global trade tension driven by repeated tariff threats?
Lagarde said she expects only a small inflation effect from U.S. tariffs. She added that Germany could feel more pressure than France due to trade exposure, pointing to the euro zone inflation at 1.9 percent, which sits close to the ECB target. Based on current data, she said the direct price impact should remain minimal.
Still, Lagarde stressed that uncertainty poses a larger risk than price changes. She said constant reversals create instability that markets and firms struggle to manage. Interest rates have remained on hold since June. Investors and economists do not expect near-term moves as policymakers monitor trade risks.
Bank of France Governor Francois Villeroy de Galhau echoed that view earlier Tuesday. He said new tariffs require assessment, yet he expects muted effects on prices.
Lagarde told French radio RTL that Europe needs a deep review to face what she called the dawn of a new international order. She linked that need to rising global protectionism. She said Europe would gain strength by removing non-tariff barriers within the bloc. According to Lagarde, smoother internal trade could improve resilience against external shocks.
International trade uncertainty can also influence inflation through higher import costs. Europe imports many goods from the United States, which could complicate price stability goals. Trump said on Saturday that he plans to raise tariffs from February 1. The measures would target Denmark, Sweden, France, Germany, the Netherlands, and Finland.
Britain and Norway also face the proposed tariffs. Trump tied the move to demands allowing U.S. access to buy Greenland, a step that major EU states criticized. Lagarde described Trump’s approach as transactional. She said he often sets demands at levels that appear unrealistic.
She added that Europe has faced similar trade disputes before. In that sense, she said, this episode reflects a familiar pattern in transatlantic relations.
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Christine Lagarde warned that Trump tariff threats have revived uncertainty across U.S. EU trade ties. She said inflation effects remain limited for now. Still, shifting tariff signals strain trust and planning. European leaders now face pressure to strengthen internal trade resilience and assess risks carefully.