ECB’s Draghi's Key words

You don’t have to be a seasoned central-bank watcher to decipher the message in Mario Draghi’s latest comments on trade.

In what’s seen as a rebuke to President Donald Trump, the European Central Bank president on Thursday laid out why he sees trade as one of the two main risks today — and why the state of international relations is a big worry.

“If you put tariffs against your allies, one wonders who the enemies are,” Draghi said at a news conference after the central bank’s monetary policy meeting.

Of course, the ECB chief didn’t directly mention the U.S. But he clearly signaled his disapproval of the Trump administration’s plan to slap tariffs on steel and aluminum imports.

In a rare instance of stepping into a non-central-bank debate, Draghi added his voice to the chorus of countries and even Republican lawmakers warning about the economic damage the tariffs could cause. The European Union has already outlined the levies it could impose in retaliation.

In particular, Draghi pointed to the risk U.S. protectionist measure post to the dollar DXY, +0.50%  and to the global economy, as well as to the established way of dealing with trade relations.

“We are convinced that disputes should be discussed and resolved in a multilateral framework, that unilateral decisions are dangerous,” Draghi said.

The EU has said it will take its case against the tariffs to the World Trade Organization.

The world is watching to see whether Trump will go through with the tariff plan and sign a decree to tax steel imports by 25% and aluminum by 10%. The president is expected to formalize the tariffs later on Thursday and has announced a meeting at 3:30 p.m. Eastern Time at the White House.

Draghi said the immediate impact of the tariffs on the eurozone was likely to be small, but that the longer-term effect could be more severe, depending on counter-measures and the impact on economic confidence.

“The effect on confidence is very difficult to assess. But if it’s a negative effect on confidence that’s going to be negative on both inflation and the outlook,” he said.

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Source: marketwatch.com