The US-EU trade agreement is not far from the estimated Baseline ECB, Lagarde said

The trade agreement between the US and the EU is close to the basic line assumed by the European central bank, but uncertainty remains in the main sectors such as medicines and semiconductors, ECB President Christine Lagarde said on Wednesday.

The EU received 15% of the tariffs on most items in the agreement agreed upon last month, avoiding the trade war all-out and giving a greater business, even if new obstacles slow down economic growth.

“The trade agreement sets an average tariff that is estimated to be located between 12% and 16% for imports of goods -the Euro US area,” Lagarde said in Geneva.

“The average effective tariff is somewhat higher than – but still close – the assumptions used in our basic projections last June,” he said. “The results of the trade agreement are far below the severe scenario for US tariffs of more than 20%.”

The Basic ECB projection assumes that economic growth of 1.1% next year while the “severe” results will reduce this to 0.7%, the June ECB projection shows.

The US-EU trade agreement still tends to burden economic growth, Lagarde added, by saying a long predicted slowdown had been proven in the second quarter economic data.

EU, which always relies on extensive foreign trade for growth, must now diversify trade with other countries to maintain growth and compensate for the negative impacts of tariffs, Lagarde said.

“While the United States will remain important trading, Europe must also aim to deepen its trade relations with other jurisdictions, increasing export-oriented economic power,” he said.
Source: Reuters