By Paul Hannon
Higher barriers to trade would have a negative impact on the global economy, and Europe must be prepared for increased tensions, Bank of Finland Governor Olli Rehn said Tuesday.
Rehn, who is a member of the European Central Bank's governing council, said a soft landing for the eurozone economy was still a "plausible" scenario, but that the outlook is clouded by growing geopolitical uncertainty.
A new element in that uncertainty is the trade policy of Donald Trump in his second term as U.S. president. Trump has expressed a desire to raise tariffs on imports from a wide range of countries.
"What we do know is that significant import duties could have negative ramifications for the global economy," said Rehn.
Rehn said Europe must be better positioned to respond than it was during Trump's first term.
"If a trade war were to start, Europe must not be unprepared," he said.
The ECB continues to say that its key interest rate needs to stay restrictive, and damp demand in order to cool inflation. But as it cuts its key rate, there will come a point where it moves to neutral, where policy is neither restraining or stimulating the economy. Rehn said that was likely to happen in the first half of next year.
"We might expect leaving restrictive territory between January and June," he said.
Write to Paul Hannon at paul.hannon@wsj.com
(END) Dow Jones Newswires
11-12-24 0517ET
