Central bankers losing sleep over Europe’s souring economies have another worry looming large: how much more damage Donald Trump could cause if he returns to the White House, according to Bloomberg.
With memories of the former US president’s first stint in office still fresh, policymakers know his appetite to wage new trade wars threatens unavoidable fallout on a region whose position is far weaker than last time round. Investors are alive to the dangers too and market strategists say a win for Trump could drive down the euro toward parity with the dollar.
The most tangible concern is the Republican candidate’s pledge to impose goods tariffs of 60 per cent on China and as much as 20 per cent on everyone else. Such measures, if implemented, would inflict the biggest trade shock since the Smoot-Hawley Act that deepened the Great Depression of the 1930s, dwarfing the impact of his actions when in office for four years starting in 2017.
Mindful of that, several central bankers around the continent are concerned that a Trump victory at the Nov 5 election could complicate the job of taming inflation without crashing economies, according to people familiar with the matter, who sought anonymity to cite confidential discussions.
Even sanguine officials might reconsider as they find themselves in the eye of the storm in Washington this week for the International Monetary Fund’s meetings. The unknowns present central banks, from Frankfurt to London to Stockholm, with arguably the cloudiest horizon since the run-up to Russia’s invasion of Ukraine — an event that itself upended their outlooks.