Joachim Nagel, European Central Bank Governing Council member and the Bundesbank's President, said the tariffs promised by Donald Trump would have a negative impact on international trade, but their impact on inflation was likely to be "negligible."
Trump has made tariffs a key element of his election campaign, which has increased fears about a new phase of the US-China trade war. Trump's proposals include tariffs of up to 20% on all imported goods, and 60% on goods from China.
Commenting on the possible impact of tariffs on inflation, Nagel referred to empirical studies, and stated that the impact of global integration on domestic prices is "economically small". "Accordingly, global integration should decrease significantly in order to cause a noticeable increase in inflationary pressure. And so far we have not seen this," Nagel said, adding that if geo-economic fragmentation does lead to increased inflationary pressures, the ECB and other Central banks will be able to solve this problem with higher interest rates.
The Bundesbank president has repeatedly warned the re-election of Donald Trump augurs a protectionist era and threatens to fragment the global economic order.