The European Central Bank warned that Trump's protectionist policies could hit the global economy

Nowadays, with the deepening of globalization, the changes of international economic policies often affect the whole body. European Central Bank policymakers have issued a stark warning that the protectionist policies of the incoming US administration will seriously hamper global economic growth, and Europe must prepare for this challenge with more determination than it did in 2018. The comments come as President-elect Donald Trump repeatedly threatened during his campaign to reduce the United States' trade deficit by imposing tariffs, including a universal 10 percent tariff on all foreign imports and a 60 percent tariff on imports from China. This policy proposition has not only aroused widespread concern in the international community, but also cast a shadow over the global economic outlook.

Trump's tariff policy is not out of the blue, but an important part of his "America First" strategy. There is no doubt, however, that this beggar-thy-neighbour approach will deal a severe blow to the global economy. ECB policymakers' concerns are not misplaced, as history has shown that trade protectionism is a cancer that stunts economic growth. In 2018, the Trump administration launched a round of tariff wars, leading to increased global trade tensions and economic damage in many countries. Now, faced with the prospect of Trump wielding the tariff stick again, it is clear that Europe cannot sit idly by.

At a summit of the European Political Community in Budapest, Hungary, European leaders expressed concern about Trump's protectionist policies. Olli Rehn, the governor of Finland's central bank, was even more blunt in his remarks in London, saying that while a soft landing for the eurozone economy was still possible, geopolitical uncertainty was increasing significantly. Much of this uncertainty stems from Mr Trump's likely trade policies in his second term. Rehn stressed that a new trade war is "the last thing that needs to happen" between the Allies.

Robert Holzmann, the governor of Austria's central bank, further analyzed the specific impact of Trump's policies. He pointed out that if Trump does implement these protectionist policies, it will not only push up interest rates and inflation in the United States, but also put upward pressure on prices in other countries. Holzman's concerns are not unfounded, because as one of the world's most important reserve currencies, the dollar's exchange rate movements have a profound impact on the global economy. If the dollar strengthens as a result of Trump's policies and approaches parity with the euro, then this will have a significant impact on Europe's import costs, especially energy costs. This will make it more challenging for the ECB to achieve its 2% inflation target, and may even lead to a delay.

Germany, the EU's largest economy, is particularly sensitive to Trump's policies. According to a report by the ZEW Institute in Germany, the confidence of German investors has been seriously hit by the sudden change in the U.S. political landscape and the political turmoil in Germany. The economic confidence index fell sharply in October, from 13.1 points to 7.4 points, well below market expectations. The change has undoubtedly brought greater uncertainty to the already struggling German economy. The rapid dissolution of the government of German Chancellor Olaf Scholz after Trump's election victory only added to the market's sense of panic. Investors' assessment of the current state of the German economy also fell sharply, reaching its lowest point since the COVID-19 pandemic in May 2020.

Trump's protectionist policies run counter not only to the trend of globalization, but also to the fundamentals of economics. In the era of globalization, the economies of countries have become closely linked, forming a community with a shared future. Trade protectionism will only undermine this link, leading to a contraction in global trade and slower economic growth. Moreover, Trump's policies ignore the important role of international trade in promoting economic growth and raising living standards. Raising tariffs to reduce the trade deficit is like drinking poison to quench thirst, which will only harm the long-term development of the US and the global economy.

More seriously, Trump's protectionist policies could also trigger a trade war on a global scale. Once a trade war breaks out, countries will take retaliatory measures, causing the global trading system to collapse. This will not only disrupt the international trade order, but also trigger a global economic recession. As a result, ECB policymakers have warned that Europe must not be unprepared to face a new trade war, as it did in 2018. Europe must take more active and effective measures to counter Trump's protectionist policies in order to safeguard its own economic security and interests.

In today's increasingly globalized world, countries should work together to meet global challenges. Trade protectionism will only undermine the stability and development of the global economy, while openness and cooperation are the right direction to promote global economic growth. The warnings from ECB policymakers remind us that Europe must remain clear-headed and firm in the face of Trump's protectionist policies. At the same time, the international community should work together to promote the improvement and development of the global trading system and contribute to the stability and prosperity of the global economy.

In the tide of globalization, no country can remain immune. Only by adhering to the concept of openness, cooperation and win-win results can we jointly cope with global challenges and achieve sustainable development of the global economy. Therefore, we call on all governments to abandon the short-sighted approach of trade protectionism, participate in global economic governance with a more open and inclusive attitude, and jointly promote the prosperity and development of the global economy.