MW EU should avoid trade war with Trump by buying more U.S. weapons and LNG, Christine Lagarde says

By Louis Goss

Europe's leaders should work to avoid a trade war with the U.S. under Donald Trump by buying more American weapons and liquified natural gas $(LNG)$, European Central Bank (ECB) president Christine Lagarde has said.

In an interview with the Financial Times, Lagarde called on European Union leaders "not to retaliate, but to negotiate" as she warned a "trade war at large" is in "nobody's interest" and would lead to "a global reduction of GDP."

Trump has vowed to impose 10% tariffs on imports of goods from all countries into the U.S. and place 60% tariffs on all imports from China, leading to concerns the EU's trade surplus with America could be wiped out.

At a rally in the immediate runup to the U.S. elections, Trump suggested the EU would have to "pay a big price" for failing to buy enough American products. "They don't take our cars. They don't take our farm products. They sell millions and millions of cars in the United States," Trump said.

Lagarde said the EU should approach Trump's threats with a "cheque-book strategy" by offering to buy goods including U.S. LNG and weaponry. "This is a better scenario than a pure retaliation strategy, which can lead to a tit-for-tat process where no one is really a winner," she said.

EU officials are currently exploring plans to increase European purchases of U.S. goods including LNG, defense equipment, and agricultural products, including by potentially using money from EU taxpayers.

The ECB chief also called on EU policymakers to monitor the potential for a "rerouting scenario" through which U.S. tariffs on Chinese exports see goods from China redirected to Europe instead.

Largarde noted Trump has put forward a wide-range of possible tariff options, suggesting he may be "open to discussion," as she said there could now be an opportunity to for the EU leaders and the new U.S. president to "sit at the table and see how we can work together."

The 68-year-old added that comments she made at the start of 2024, in which she said Trump is "clearly a threat to Europe," remain "prescient" today. "Just look at the debates that we are having in many countries in Europe," the ECB president said.

Lagarde, however, said her thinking had "changed a bit" on the best way to approach a second Trump term as she suggested Europeans must start seeing the situation as a "challenge we have to respond to."

The ECB president said the crisis currently facing Europe's economy had also been a "big awakening" as she argued the EU must take drastic action to compete. ""Europe is lagging behind. But I wouldn't say that Europe cannot catch up," she said.

Lagarde added that Trump's tariffs could become an "accelerator of a reset that we need" as she suggested the new president's push could advance plans for the creation of an EU wide capital market regulated by a centralized authority.

-Louis Goss

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November 28, 2024 04:17 ET (09:17 GMT)

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