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ECB’s Draghi warns of ‘rising protectionism’ risks

Brussels fired a warning saying it was preparing to retaliate with targeted tariffs on a slew of products from steel to denim to peanut butter

Image Credit: Reuters
Mario Draghi
Gulf News

Frankfurt am Main: ECB chief Mario Draghi raised concerns Thursday about the state of international relations after US President Donald Trump sparked fears of a trade war with his threat to impose punitive tariffs on steel and aluminium imports.

“There is a certain worry or concern about the state of international relations, because if you put tariffs against what are your allies, one wonders who the enemies are,” said Draghi.

“We are convinced that disputes should be discussed and resolved in a multilateral framework,” he said, warning that “unilateral decisions are dangerous”.

Trump’s impromptu announcement last week that he intended to slap 25 per cent taxes on steel imports and 10 per cent on aluminium revived the spectre of a trade war between the United States and major trade allies like Canada or the European Union.

Brussels fired a warning Wednesday, saying that it was preparing to retaliate with targeted tariffs on a slew of products from steel to denim to peanut butter.

Draghi cautioned that the “rising protectionism” could harm growth in the Eurozone.

“Downside risks relate primarily to global factors including rising protectionism and developments in foreign exchange and other financial markets,” Draghi told reporters after an ECB governing council meeting in Frankfurt.

Growth outlook

Draghi also unveiled the bank’s latest growth and inflation projections. He said the ECB had lifted its 2018 growth forecast for the Eurozone from 2.3 to 2.4 per cent, underscoring a bright outlook despite the political risks on the horizon. The bank kept its growth forecasts steady for 2019 and 2020, at 1.9 and 1.7 per cent respectively.

Its inflation projections were also unchanged for 2018 at 1.4 per cent, but slightly lowered for 2019 from 1.5 to 1.4 per cent. The bank still expects inflation to hit 1.7 per cent in 2020 — inching closer to the ECB’s target of just under 2.0 per cent.