EZB President to Advocate for a Reinforced Euro in Counter to Trump's Policies - ECB head calls for a stronger euro in response to Trump's actions
ECB President Advocates for Stronger Euro amid Trade Dispute with US
In a speech at the Hertie School in Berlin, European Central Bank (ECB) President Christine Lagarde expressed concerns about the ongoing trade dispute between the US and the EU, describing it as a significant economic threat. She argued that the world order is being severely disrupted and that multilateral cooperation has been replaced by zero-sum thinking and bilateral power plays.
While Lagarde did not explicitly mention US President Donald Trump, her speech was widely interpreted as a response to Trump's latest threat of tariffs against the EU. She emphasized that the uncertainty surrounding the trade dispute poses risks to Europe, where exports account for almost a fifth of value creation and secure around 30 million jobs.
Lagarde saw an opportunity for Europe to strengthen its position by promoting a greater international role for the euro. Currently, around 20 percent of global foreign exchange reserves are held in euros, while the dollar accounts for 58 percent. Since Trump announced his global tariff package, the dollar has been under pressure, causing the euro to appreciate significantly against the dollar for the first time in over three years.
Strengthening the international role of the euro could have several benefits for the eurozone, according to Lagarde. Loans could become cheaper, boosting domestic demand. Exchange rate fluctuations would have less impact, as more trade would be conducted in euros, and Europe would be better protected against sanctions.
To achieve this, Europe needs to address several areas for improvement, Lagarde said. Europe needs to become stronger geopolitically, economically, and legally. This includes securing more trade agreements, catching up militarily, completing the single market, deepening the capital market, and defending the rule of law.
According to recent research, the ongoing trade dispute between the US and the EU could lead to significant contractions in trade flows and Macroeconomic effects. The EU has initiated a consultation on potential countermeasures in response to new US tariffs, with lists of affected products under consideration. Existing EU retaliatory measures were suspended until July 14, 2025, following a pause in US tariffs to facilitate negotiations.
In light of her concerns about the ongoing trade dispute between the US and EU, ECB President Christine Lagarde advocated for a stronger euro to mitigate risks, as exports account for almost a fifth of value creation and support around 30 million jobs in Europe. To achieve this, she proposed promoting a greater international role for the euro, which could lead to cheaper loans, reduced impact of exchange rate fluctuations, and better protection against sanctions. Simultaneously, to strengthen the eurozone, she highlighted the need for Europe to address areas such as securing more trade agreements, completing the single market, deepening the capital market, and defending the rule of law.
