FRANKFURT, Feb 10 (Reuters) – U.S. tariffs are weighing on euro zone growth and inflation but the most affected sectors are also sensitive to \u200binterest rates, so cutting borrowing costs could offset the downward price pressures, \u200ca European Central Bank blog post said on Tuesday.<\/p>\n
The U.S. imposed tariffs on most trading partners last \u200cyear and ECB officials have been studying their likely impact, often coming to opposing conclusions since trade barriers affect the economy on multiple levels.<\/p>\n
But a study done by ECB economists concluded that the drop in demand due to tariffs outweighs any inflation-boosting \u2060supply effects, creating a drag \u200cfor prices.<\/p>\n
“At its lowest point, about one and a half years after a tariff-related trade surprise that cuts euro zone exports to the \u200dUnited States by 1%, the consumer price level is around 0.1% lower,” the blog post, which does not necessarily represent the ECB’s views, argued.<\/p>\n
Trade data has been volatile over the \u200bpast year as firms frontloaded purchases to avoid tariffs, which stand at 15% \u200cas a baseline for EU goods entering the U.S., then ran down stocks.<\/p>\n
However, in the latest three months for which data is available, euro zone exports to the U.S. are down about 6.5% from the same period a year earlier.<\/p>\n
These findings are significant since euro zone inflation fell to 1.7% in January, below the \u2060ECB’s 2% target, and some policymakers fear that \u200binflation could fall further.<\/p>\n
The good news for the \u200bECB is that sectors hit hardest by the tariff shock also respond most strongly to interest rate changes, the blog argued. These sectors \u200dinclude machinery, autos and \u2060chemicals.<\/p>\n
Output may drop sharply because of tariffs but expands strongly in response to lower borrowing costs, they argued.<\/p>\n
“We find that this pattern holds for \u2060about 60% of the sectors we study \u2013 representing roughly 50% of total average euro zone industrial output and \u200cof total goods exports to the United States,” the economists said.<\/p>\n
(Reporting \u200cby Balazs Koranyi; Editing by Sharon Singleton)<\/p>\n","protected":false},"excerpt":{"rendered":"FRANKFURT, Feb 10 (Reuters) – U.S. tariffs are weighing on euro zone growth and inflation but the most…\n","protected":false},"author":2,"featured_media":290777,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[72,113,28199,14725,61,1095,5232,60],"class_list":{"0":"post-290776","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-euro-zone","11":"tag-european-central-bank","12":"tag-ie","13":"tag-inflation","14":"tag-interest-rates","15":"tag-ireland"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/290776","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=290776"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/290776\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/290777"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=290776"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=290776"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=290776"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}