On April 28, 2025, François Villeroy de Galhau, a member of the European Central Bank's (ECB) Governing Council and Governor of the Bank of France, addressed the economic implications of U.S. President Donald Trump's tariff policies during an interview on RTL Radio. Villeroy criticized these protectionist measures, emphasizing their adverse effects on both the U.S. and global economies. He highlighted that such policies contribute to reduced economic growth and heightened inflation.

Despite these challenges, Villeroy reassured that there is no immediate risk of recession in France or the broader Eurozone, noting that inflation continues to decline. In this context, he indicated that the ECB has room to gradually reduce interest rates further. The ECB had already cut its benchmark rate to 2.25% earlier in April, and policymakers are considering another rate cut in June, favoring a cautious approach over a significant reduction.

President Trump's administration has implemented a series of tariffs aimed at protecting domestic industries. These measures have introduced significant uncertainty into global trade, affecting economic growth and inflation rates worldwide. In the United States, the April jobs report is anticipated to reflect a substantial decline in hiring, with projections dropping to 125,000 jobs from the previous month's 228,000. This downturn is attributed to profit uncertainties and government workforce reductions, notably within the Department of Government Efficiency. However, the unemployment rate is expected to remain steady at 4.2%, as President Trump has paused further tariffs and signaled openness to negotiations. Analysts believe this stance may lead the Federal Reserve to maintain current interest rates.

The Eurozone is experiencing a complex economic environment influenced by external trade tensions and internal fiscal policies. The International Monetary Fund (IMF) has revised down its growth forecasts for the Eurozone, citing escalating U.S. tariffs and associated uncertainties. The growth projection for 2025 is now 0.8%, a reduction of 0.2 percentage points from earlier forecasts. Despite these challenges, the ECB has been proactive in adjusting its monetary policy to support economic stability. In April 2025, the ECB cut its benchmark rate to 2.25%, marking the seventh rate cut within a year. Policymakers are considering an additional rate cut in June, with a preference for a cautious approach over a significant reduction.

ECB officials have expressed varying perspectives on the current economic situation and the appropriate monetary policy response:

• Klaas Knot, Dutch central bank governor, highlighted the complexities of the upcoming June policy meeting, emphasizing uncertainties surrounding inflation risks linked to U.S. tariffs. He noted that while short-term inflation is expected to decline due to a demand shock from the tariffs, medium- and long-term inflation risks remain "two-sided."

• Olli Rehn, ECB Governing Council member, indicated that the ECB may need to consider further interest rate cuts if inflation projections for June fall below the 2% medium-term target. He emphasized a data-dependent approach, suggesting that a larger-than-usual 50-basis point cut could be considered if conditions warrant.

• Philip Lane, ECB Chief Economist, stated that the ECB is not currently considering bond purchases or other extraordinary stimulus measures, as there is still room to cut interest rates. He emphasized the ECB's flexibility in addressing uncertainty, suggesting that rate cuts could be adjusted in size and pace depending on the evolving economic landscape.

The ECB's latest Survey of Professional Forecasters predicts that Eurozone inflation will average 2.2% in 2025, slightly higher than the previous forecast of 2.1%, before stabilizing at the ECB’s 2% target in 2026. This follows the ECB's decision to cut interest rates for the seventh time in a year, citing ongoing disinflation and concerns of inflation undershooting. The survey’s projections may be somewhat outdated, as they were based on data collected before April 4, after which financial markets shifted due to volatile U.S. trade policies. The euro has appreciated against the dollar, and energy prices have declined, both factors potentially tempering inflation.

The ongoing trade tensions and the ECB's monetary policy responses have several social and societal implications:

• Employment and Income: The anticipated decline in U.S. hiring due to tariff-induced uncertainties may lead to income instability for workers, particularly in export-dependent industries.

• Consumer Prices: Protectionist measures can result in higher consumer prices due to increased costs of imported goods, affecting household purchasing power.

• Business Confidence: Uncertainty in trade policies can dampen business investment and expansion plans, potentially leading to slower economic growth and innovation.

• Monetary Policy Impact: The ECB's rate cuts aim to stimulate economic activity, but prolonged low interest rates can affect savers and may lead to asset bubbles if not managed carefully.

Villeroy's critique of U.S. tariff policies and the ECB's readiness to adjust interest rates reflect a strategic approach to mitigating the adverse effects of global trade tensions on the Eurozone economy. As the situation evolves, the ECB's policies will be crucial in maintaining economic stability amidst external pressures.