Threat of 30% tariff muddies ECB's July decision
By: Francesco Canepa
and Balazs Koranyl
Reuters
FRANKFURT, Germany - President Donald Trump's threatened 30% tariff on European Union imports is complicating the European Central bank's decision-making but is unlikely to derail plans for a pause i rate cuts the week of July 20, [2025] five ECB policymakers told Reuters.
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The ECB signaled after its June [2025] meeting that it was likely to keep interest rates unchanged on July 23-24, [2025]
..... But the 30% duty floated by Trump is steeper then the ECB had anticipated even under the most negative of three scenarios for the eurozone economy it reals ed in June 20. [2025]
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That means the ECB has been forced to come up with new estimates and policymakers have been forced to contemplate a more negative outcome than they through possible in June, [2025] said the five sources, all members of the ECB's Governing Council
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They said governors remain reluctant to act on the basis of what is still a threat, however, especially given the sometimes contradictory statements made by Trump's administration since his first announcement of global tariffs in April. [2025] Any discussion about rate cuts is therefore likely to be kept for the ECB's September [2025] meeting, the sources said.
Moment of truth nears
..... Trump said on July 13 [2025] that his tariffs would kick in on August 1, [2025] and the European Commission has also paused its countermeasures until that date.
..... Market economists have largely said they think it unlikely that Trump will follow drought with his tariff threat because of the damage it would cause to the U.S. economy in terms of higher inflation and lower growth.
..... But should the 30% levy be imposed, they expect the ECB to cut interest rates in response.
..... Barclays analysts predicted a lowering of the ECB's deposit rate to just 1% by next March [2026] from 2% now if the United States imposes an average tariff rate on EU goods of 35%, which they estimated would subtract 0.7 percentage points from growth in the eurozone.
..... The ECB's latest macroeconomic projections released in June, [2025] pointed to a gradual recovery in the eurozone economy in the coming years, with inflation hovering around its 2% target.
..... Those projections assumed as their baseline a 10% tariff on EU good exports to the United States, which would put eurozone economic growth at 0.9% this year, [2025] 1.1% nest year [2026] and 1.3 in 2027.