‘Economic risks less pronounced as trade tensions ease’

Frankfurt am Main, Germany– European Central Bank chief Christine Lagarde on Thursday said risks to the eurozone economy had become “less pronounced” in the wake of a US-China trade truce even as President Donald Trump reignited a trade spat with Europe.

Speaking to reporters after chairing her second meeting as president, Lagarde said the bank’s ultra-easy money policies remained necessary in the face of stubbornly low inflation and slow growth.

But she hinted that the ECB was more optimistic about the euro area outlook following the partial US-China trade deal struck after two years of tensions that roiled the global economy.

“Risks related to geopolitical factors, rising protectionism and vulnerabilities in emerging markets remain tilted to the downside, but have become less pronounced as some of the uncertainty surrounding international trade is receding,” Lagarde told reporters in Frankfurt.

She said the US-China deal had reduced uncertainty but would also have knock-on effects on other countries, creating winners and losers.

The ECB would now “very carefully” study the impact of the deal, she said.

But Trump already appeared to be gearing up for his next trade battle, after saying in Davos on Wednesday that the European Union was next in his line of sights.

“The European Union is tougher to deal with than anybody. They’ve taken advantage of our country for many years,” Trump told Fox Business Network.

He also threatened to impose crippling tariffs on EU-built cars unless the EU budges on a transatlantic trade deal.

Asked about the flare-up in tensions, Lagarde said she took “some comfort” from the upbeat sounds that followed Trump’s meeting with European Commission head Ursula von der Leyen in Davos.

“While we all know that the results of those meetings are preliminary, the tone and the determination on both sides to draw positive conclusions from that meeting...I think is to be taken as a positive signal.”