Trump's tariffs may have a negligible effect on inflation, according to ECB analyst Nagel

U.S. President-elect Donald Trump's proposed tariffs could disrupt international trade, but European Central Bank policymaker Joachim Nagel believes they would likely have a "limited impact" on inflation.

Trump emphasized tariffs as a central part of his campaign, leading some analysts to worry about a repeat of the 2018-2019 trade conflict between the U.S. and China under the previous Republican president.

Nagel, also the President of Germany's Bundesbank, referred to empirical studies that show the impact of global integration on domestic prices is "economically small."

"While we can be confident in the direction of this impact, its scale seems minimal," he explained at a conference in Tokyo. "For a noticeable rise in inflationary pressures, global integration would need to shrink significantly. However, we have not observed this so far."

He further stated that, if geoeconomic fragmentation did result in higher inflation, central banks, including the ECB, could counteract it through higher interest rates.

Paraphrasing text from "Reuters" all rights reserved by the original author.