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Lagarde Warns Of Trade Fragmentation

US-EU

Christine Lagarde, President of the European Central Bank, has warned of trade fragmentation in a speech at Deutsche Börse Annual Reception in Eschborn, Germany.

  • Legarde said that, "major economies – led by the United States and China – are increasingly using trade to limit the ambitions of geopolitical rivals. That could fragment world trade with potentially huge costs. The IMF estimates that severe trade fragmentation may cost global output roughly 7% in the long term – an amount similar to the annual output of Japan and Germany combined."
  • Lagarde identifies the US Inflation Reduction Act as a "geopolitical wind" which may lead to a “scramble for resources,” and argues that the EU must protect its "critical interests in a fast-changing world," because as an economy that is deeply integrated into global supply chains, the EU is more exposed to trade risk than the United States or China.
  • Full text of the speech: https://www.ecb.europa.eu/press/key/date/2023/html...~2d9786eedf.en.html

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