According to a senior official at the European Central Bank, President Donald Trump has drawn the entire world into a game where everyone ends up losing — referring to his trade policy, which is based on flawed economic reasoning.
"Trump's trade tirades are slowing down economic growth, including in the U.S., and threaten to undermine financial stability," said Francois Villeroy de Galhau, a member of the ECB's Governing Council, during a speech in New York.
Villeroy called for de-escalation to avoid a spiral of rising tariffs. "Now more than ever, it's important to speak the truth across the Atlantic, fully assess the damage from the trade war, and pave the way for a possible positive dialogue," said Villeroy, one of the most influential central bankers in Europe.
His comments were among the strongest from a European partner in defense and economic matters. It's clear that the Trump administration's reliance on protectionist measures is likely to backfire. The tariffs, initially intended to shield American manufacturers, have already led to higher import costs and, consequently, rising consumer prices. This reduces household purchasing power and weakens consumer demand — a critical driver of economic growth. Beyond the domestic impact, Trump's trade wars are severely harming global trade. The uncertainty caused by constant threats of new tariffs and retaliatory measures deters investment and slows global economic growth.
Villeroy also challenged Trump's claim that the European Union was created to hurt America, stating that the bloc was formed to bring lasting peace, democracy, and a market economy to Europe.
His remarks came just hours after the International Monetary Fund sharply downgraded its forecasts for global economic growth for this year and the next, warning that things could worsen further if a full-scale trade war erupts.
Earlier on Tuesday, ECB President Christine Lagarde urged EU governments to reduce internal trade barriers to make the economy more resilient to external shocks. Clearly, the uncertainty around Trump's trade intentions has caught the European economy at a vulnerable time. Manufacturing and private consumption had only just begun to show signs of recovery after months of sluggish demand driven by high inflation and energy challenges — now that recovery is at risk due to escalating trade tensions.
"International trade is not a zero-sum game where one country's gain must come at another's expense," said Villeroy. "On the contrary, it is the most efficient way to achieve shared prosperity through the exchange of goods and services, ideas, talent, and innovation."
He also noted that the U.S. should acknowledge the significant growth in its trade surplus with Europe in services in recent years, and emphasized that a value-added tax is not the same as a customs duty, as the Trump administration suggests. Villeroy concluded that there's still room for pragmatic multilateralism between the U.S. and Europe when it comes to financial stability, international payments, and cybersecurity.
It's worth highlighting that Trump's trade war has significantly impacted the currency markets. In normal times, investors might flock to the U.S. dollar as a safe-haven asset — but now, capital is clearly flowing out of dollar-denominated assets and into the euro and British pound. Many traders and investors are wary of Trump's aggressive stance, which they fear could push the U.S. economy into recession.
EUR/USD Technical Outlook: At present, EUR/USD buyers need to focus on reclaiming the 1.1360 level. Only a solid breakout here would allow targeting a test of 1.1430. From there, a move toward 1.1500 is possible, though achieving this without support from large market participants may prove difficult. The ultimate upside target remains the high at 1.1570.
If the instrument declines, meaningful buying activity is expected only around 1.1280. If no support emerges there, it would be reasonable to wait for a test of the 1.1210 low or consider long positions from 1.1150.
GBP/USD Technical Outlook: For GBP/USD, buyers must overcome the nearest resistance at 1.3300. Only this would open the way toward 1.3350, which is a challenging level to breach. The ultimate bullish target lies at 1.3416.
In case of a decline, bears will attempt to seize control at 1.3240. A successful break of this range would deliver a serious blow to bullish positions and drive GBP/USD toward 1.3205, with potential to test 1.3165.
