According to the French Governor, the tariff hikes announced on April 2 by U.S. President Donald Trump are expected to primarily impact U.S. growth and inflation, while the European Union (EU) should be prepared to strengthen its economy.
François Villeroy de Galhau believes that the fight against inflation is “practically assured,” approaching the 2% target. However, he notes that the decisions from Washington demand “tougher economic choices.”
“Today, our level of play is not up to the challenge,” he warned in his annual message to French President Emmanuel Macron and leaders of the country’s upper (Senate) and lower (National Assembly) chambers, as reported by the French news agency AFP.
In this context, he pointed out that Europe and France urgently need to “emerge from a certain economic indifference” and that the response “can only be collective.”
According to the head of the Bank of France, the trade war would directly impact the Eurozone’s growth by 0.25 points this year, with France being less exposed than Germany or Italy.
On the other hand, he conceded that the effect on inflation could be “very slight, or negative.”
The French official justifies this by the fact that the inflation reduction process is further advanced in Europe, the decline in basic product prices, the appreciation of the euro, and the EU’s response measures being limited to the U.S., unlike the U.S. measures which are aimed at the entire world.
Thus, the governor believes that the European Central Bank (ECB) has the scope to continue the trajectory of reducing key interest rates, which began in June 2024.
For France, he suggests controlling public spending and staying “on the right path” towards a deficit of 5.4% of GDP this year, down from 5.8% in 2024, and estimating it to be 3% by 2029.
“We cannot continue to fund our current spending on credit; we must be collectively prepared to work more and better and to make the necessary European reforms to increase our potential growth from 1% to 1.5% per year by 2030,” he insisted, as reported by the French news agency.
The U.S. announced on Tuesday tariffs of 104% on Chinese imports effective today, fulfilling the threat of increasing tariffs by 50 percentage points.
Donald Trump announced last week his new customs tariffs on Chinese products would reach 54% starting Wednesday and threatened to impose tariffs by another 50 points should China retaliate.
On Tuesday, French President Emmanuel Macron expressed hope that his U.S. counterpart, Donald Trump, “reverses his decision” regarding tariffs imposed on the rest of the world, especially the European Union.
The European Union (EU) today approved, by majority, the imposition of 25% tariffs on American products in response to the tariffs applied by the United States on European steel and aluminum.
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