European Central Bank (ECB) president Mario Draghi and International Monetary Fund (IMF) managing director Christine Lagarde both spoke at the 8th ECB conference focused on central, eastern and south-eastern European countries (CESEE) on Wednesday, and they warned about the possible consequences of the global trade disputes between the US and China, as well as the potential effects of increased tariffs between the US and Europe.
Mario Draghi warned that the trade war between US and China and the threatened dispute with Europe and other industrial nation could cause problems for all involved and could get worse, while Christine Lagarde noted that there is less support for global cooperation and multilateral solutions.
“Global growth has been subdued for more than six years and the largest economies in the world are putting up, or threatening to put up, new trade barriers. And this might be the beginning of something else, which might affect us all in a broader way,” she said.
She warned that CESEE countries would be the most vulnerable to these troubling developments in trade, as their economic growth model has so far relied on openness and integration.
The two economic leaders said that the threat of US import tariffs on Europe could affect those countries that are centers of European car production, including Romania, Poland, the Czech Republic, or Slovakia.
“The central and eastern European business model has become vulnerable to shocks to international trade and financial conditions,” Draghi said, noting that in some CEESE countries vehicle exports represent nearly 30% of total manufactured exports, making them more vulnerable to US President Trump’s threat to increase tariffs on European auto imports.
Trump announced a 25 percent tax on all EU car imports in August last year, but has not yet implemented the move.
“The main long-term challenge is moving towards a more balanced growth and financing model, which is more reliant on domestic innovation and on higher investment spending than it has been so far,” Draghi added.