EU-US trade agreement remains ambiguous: Lagarde's remarks

In a recent development, the Financial Times reported that the European Union's (EU) push to protect digital rules is causing a delay in a trade statement with the United States (US). This delay comes amidst ongoing negotiations, with the EU trying to secure exemptions for certain sectors.

The trade standoff between the EU and US has its roots in President Donald Trump's efforts to boost US manufacturing and reduce the country's trade deficit. These efforts have been through imposing painful import tariffs, which have had far-reaching effects.

European Central Bank (ECB) President Christine Lagarde has stated that the effective US tariff rate for EU goods is between 12 and 16 percent. This high tariff rate, according to Lagarde, is somewhat higher than the ECB had forecast.

In the first quarter of the year, importers boosted their inventories in anticipation of higher tariffs, according to Lagarde. This move was likely a strategy to mitigate the impact of potential increased costs.

The US-EU trade deal, struck in September 2025, primarily focused on tariff reductions, market access, and investment cooperation. The deal lowered the threatened tariff rate on EU imports from 30% to 15%. While this is a significant step, Lagarde stated that global growth has remained broadly steady so far but has been mainly driven by tariff-induced distortions of economic activity.

The ECB expects eurozone activity to slow in the third quarter of 2025 after a strong start to the year. This slowdown is partly due to the uncertainty caused by the ongoing trade negotiations and the potential impact of tariffs on various sectors.

Lagarde also stated that new forecasts set to be published in mid-September will take into account "the implications of the EU-US trade deal for the euro area economy". These forecasts will provide a clearer picture of how the deal will affect the economy in the long term.

Despite the challenges, the ECB held interest rates steady after consecutive cuts following the EU-US deal. This decision suggests that the central bank is cautiously optimistic about the future of the economy, despite the ongoing trade uncertainties.

Trump's plans for sector-specific levies on pharmaceutical goods and semiconductors remain unclear, according to Lagarde. This uncertainty adds to the overall global uncertainty caused by the trade disputes.

In a positive note, the ECB lowered its inflation forecast to 2% for 2025 due to lower energy prices and a strengthening euro in its last macroeconomic projections in June. This indicates that the economy is stable, despite the challenges posed by the trade disputes.

The ECB also lowered its forecast for GDP growth in 2026 slightly to 1.1%. This slight decrease is likely due to the expected slowdown in the third quarter of 2025.

In conclusion, the EU-US trade deal has eased but not eliminated global uncertainty. The deal has had both positive and negative impacts on the economy, with tariff reductions supporting industrial bases and enhancing mutual investments. However, the one-time tariff-related effects and the ongoing trade disputes have caused uncertainty and slowed economic growth in some sectors. The ECB will continue to monitor the situation closely and update its forecasts as more information becomes available.