ECB’s Nagel says Trump’s tariffs may have minor impact on inflation

FRANKFURT (Reuters) – The tariffs promised by U.S. President-elect Donald Trump would upend international trade but may ultimately have a “minor impact” on inflation, European Central Bank policymaker Joachim Nagel said.

Trump made tariffs a key element of his pitch to voters, in what some analysts fear could be a much worse rerun of the Republican former president’s 2018-2019 trade war with China.

Nagel, the Bundesbank’s President, cited empirical studies showing that the effect of global integration on domestic prices is “economically small”.

“While we can be quite sure about the direction of this impact, its magnitude seems minor,” he told a conference in Tokyo. “Accordingly, global integration would have to decrease substantially to cause a noticeable rise in inflationary pressures. And, so far, we have not seen this.”

He added that, if geoeconomic fragmentation did lead to greater inflationary pressures, the ECB and other central banks would could keep it at bay via higher interest rates.