According to Yiannis Stournaras, the upcoming trade war is likely to have a serious negative impact on Europe’s economic development

President Trump’s sweep duties are in danger of causing a large “negative demand disorder” in the euro area, says Mr Stournaras, a member of the Board of Directors of the European Central Bank (ECB), awaiting ECB decision on interest rates later in the month.

In an interview with the Financial Times, Bank of Greece Governor Yiannis Stournaras warns that the upcoming trade war is likely to have a serious impact on economic growth in Europe. “A strong negative impact on growth may result in economic activity being much weaker than expected, staging inflation at a pace under our goals,” he said.

Yiannis Stournaras, one of the oldest members of the ECB’s Board of Directors, warns that the euro area is facing this disorder at a time when growth prospects are already “moderate” and inflation is in convergence to the medium -term target of 2%. The ECB is going to make its next decision on interest rates on April 17.

Last week, President Trump announced that Washington would impose 20% duties on most EU imports.

The US is the main market for the exports of EU goods, with almost 21% share of total EU exports for 2024. While duties may reduce demand in the US, economists are also concerned about the possibility that even higher US duties against China will lead to China.

Awaiting the announcement of Trump duties last week, the ECB left open the possibility of stopping interest rates, adopting a tone more restrictive to further relaxation of monetary policy after its latest interest rates reduction last month, for the sixth time from March 20%. ECB President Christine Lagarde said in March that, in the event of a trade war, inflation in the euro area could be increased by half a percentage point due to “the countermeasures that the EU will receive and the weakening of the euro exchange rate”.

Mr Stournaras disagrees with this view, arguing that “duties are a measure with a clearly deflationary impact” for the euro area. He stressed that the protectionism measures taken by the US are “worse than expected” and have created a “unprecedented” degree of “uncertainty about policies that will be practiced worldwide”, which adversely affects economic activity.

According to analysts and investors, Trump duty announcements have increased the possibility that the ECB will reduce interest rates by 0.25 of the percentage percentage in April. JPMorgan, who previously expected that the ECB would maintain its interest rates unchanged to 2.5% in April, changed its appreciation on Friday and now provides for a 0.25 -percentage points decrease in April and two more in June and September. Goldman Sachs economists also said Friday that a reduction in April is “more likely”.

Asked if the situation is so severe that he justifies a 50 -base reduction, Mr Stournaras refused to answer.

While it is difficult to “accurately estimate the impact of duties”, the negative impact on the development of the euro area “can receive any price between 0.5 and 1 percentage unit,” he warns. In March, the ECB revised its forecasts for the development of the euro area in 2025 to just 0.9%.