Odaily News European Central Bank Executive Board member Cipollone said U.S. trade measures could weigh on euro zone inflation in the short term because they weigh on global economic expansion. "The short- to medium-term impact could lead to lower euro zone inflation, as real interest rates in the euro zone have risen and the euro has appreciated following the announcement of U.S. tariffs," Cipollone said on Tuesday. "Trade measures could create the same inefficiencies as in the 20th century by shifting resources from high-productivity sectors to low-productivity sectors, and this contractionary effect could lead to persistently lower global growth rates."

The euro's strength may be the biggest surprise for policymakers since Trump announced the tariffs. They had expected the euro to depreciate, which would increase import costs, and EU countermeasures could push up inflation. "The eurozone has benefited from safe-haven inflows, with the euro appreciating and nominal bond yields falling," said Cipollone, who also raised the possibility that trade divergence could lead to "a gradual transition from a US-dominated global system to a more multipolar system, where multiple currencies compete for reserve status." (Jinshi)