According to Pierre Unche, a member of the ECB’s governing council, US President Donald Trump’s tariff policies make the European Central Bank “more complicated” beyond interest rates.
“We were heading in the right direction, and I was actually very relaxed,” he told CNBC’s Karenzso on the sidelines of the IIF European Summit in Brussels on Thursday.
“If we forgot the tariffs… we were heading in the right direction. Then the question was the issue of tweaking the pace of the cut and where we were going to land,” Wunsch said. “I think inflation could be a boring part of (20)25, and (20)25 was not a boring year. But adding tariffs to the equations makes it more complicated,” he said.
Wunsch, who is also governor of the Belgian National Bank, said tariffs are “bad to growth” and “probably” inflation, but the exact impact is uncertain, relying on potential retaliation and how exchange rates respond to duties.
His comments come the day after Trump announced 25% tariffs on all cars “not made in the US” as of April 2. In the Post on Truth Society, Trump on Thursday threatened to place “a much larger” tariffs on the European Union and Canada if he cooperates to resist duties from the US.
These are the latest developments in the disruption of Trump’s trade policy, which has also been negotiated and counter-measures unfolded, with many tariffs announced, and sometimes postponed, amended or abolished.
April 2nd will be a key date for the broader obligation to come into force, although recent comments from Trump and his administration indicate that adjustments may be made and obligations may be more tolerant than originally stated.
The interest rate decision will be made first
The ECB will make its next interest rate decision on April 17th as soon as the tariffs come into effect. According to LSEG data, the market was last priced at about 79% of the time, with an interest rate cut of 25 base points from the ECB next month.
By then, Wunsch said central banks could have a rough idea of the impact of tariffs, and could have an impact on the ECB’s decision-making. But he said “we won’t be focused much on April” as trade policy will have a medium-term impact.
The central banker on Thursday kept the door open for any possible action from the ECB on interest rates – further reductions, hiking or pauses.
“I think there’s still a limited chance we have to hike, but there may be a pause,” he said.
“If tariffs affect inflation and negatively affect growth, that would be a difficult equation. You might need to consider a pause. I’m not pleading that, but I think it should be part of the debate.”
