U.S. President-elect Donald Trump’s proposed tariffs on imported goods could significantly disrupt international trade and escalate inflationary pressures, according to Bundesbank President Joachim Nagel. Speaking in Tokyo on Monday, Nagel outlined the potential economic repercussions of Trump’s trade policies, which include tariffs of up to 20% on all imports and 60% on goods from China.
Inflationary Risks from Tariffs
Nagel warned that while a gradual reduction in global trade integration might have a modest impact on inflation, a sudden and severe increase in trade restrictions could result in significant price hikes.
“If one country raised tariffs strongly and the affected nations retaliated, we could see a significant rise in inflationary pressures,” he said.
The Bundesbank president emphasized that such tariffs could mark a turning point for the global trade system, transitioning from a multilateral framework to a more fractured and confrontational environment.
Economic Growth Concerns
Beyond inflation, Nagel cautioned that higher tariffs could hurt economic growth by undermining the benefits of global labor integration. Companies relying on international supply chains may face increased costs, leading to reduced productivity and higher consumer prices.
Tools to Counter Inflation
Nagel noted that central banks, including the European Central Bank (ECB), are equipped to handle inflation caused by reduced global integration. Measures such as raising interest rates could help maintain price stability in the eurozone.
Despite these assurances, Nagel acknowledged the broader economic impact of diminished global cooperation.
“A world once characterized by multilateralism and global cooperation has slowly shifted towards confrontation and fracture,” he observed.
Eurozone Inflation Under Control
In a separate interview with Die Zeit, Nagel stated that eurozone inflation is currently under control, though the ECB’s future interest rate decisions would be guided by incoming economic data.
