The European Central Bank expects the impact of tariffs on economic growth to exceed expectations

ChainCatcher news, four sources said that the impact of U.S. trade tariffs on Eurozone economic growth may be much greater than initially estimated by the European Central Bank, and the turmoil could also weigh on inflation in the short term. This could push the Eurozone economy into stagnation and dash hopes for economic recovery.

Supported by a large-scale public investment plan, the Eurozone economy had been growing until recently. The European Central Bank predicted last month that the trade war would reduce the Eurozone's growth rate by 0.5 percentage points in the first year, and if the EU retaliates, prices would also briefly rise by a similar magnitude.

However, sources indicated that the actual tariffs announced by Trump are more harmful than model estimates, and ECB staff have been asked to come up with new figures for policymakers to discuss at the meeting on April 17. Informal discussions among decision-makers could begin as early as this week. Everyone agrees that the 0.5 percentage point estimate is now too low, with one person stating that the impact could exceed 1 percentage point. This would essentially wipe out all economic growth, as the Eurozone's growth is expected to be around 1% this year.