(Bloomberg) -- Higher US tariffs will likely lower both economic growth and inflation in the euro region, European Central Bank Executive Board member Piero Cipollone told Corriere della Sera in an video interview.
“I think we will have more trouble with foreign demand and greater competition on internal markets,” Cipollone said. “This will put pressure on our companies with a possible reduction of growth.”
He added that higher US oil production and expanded tariffs on China may put downward pressure on prices. Lower crude costs and a possible diversion of Chinese products to Europe will probably counteract inflationary pressure coming from any increase in US interest rates, Cipollone said.
“So all this put together makes me think we’ll likely have a reduction of growth, but also a reduction in inflation,” he said.
The comments come ahead of the ECB’s policy meeting next week, where the euro zone’s subdued growth prospects are set to be a key topic of debate. Policymakers largely agree that rising protectionism under a new Trump administration would further dampen the outlook for economic expansion.
The potential impact on prices is less clear-cut, however. Chief Economist Philip Lane also highlighted likely opposing forces at work, with the balance to be determined by the “exact sequence of events.” Executive Board member Isabel Schnabel told Bloomberg last week that she expects the inflationary effect to prevail, while also cautioning that the result depends on the details of any measures.
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