Trump's Tariff Threat: A Challenge for the ECB

In a new development that puts the European Central Bank in a quandary, U.S. President Donald Trump's threatened 30% tariff on European Union imports is complicating decision-making processes. Despite this, insiders indicate a pause in rate cuts remains planned for next week.

According to five ECB policymakers, the initial plan to keep interest rates unchanged following the June meeting is now under scrutiny. This is due to Trump's proposed duty being steeper than anticipated, even under the ECB's most pessimistic economic scenarios released in June.

While intensified forecasts are now underway, ECB governors are reportedly hesitant to act solely on the basis of threats, particularly due to mixed signals from Trump's administration. Any concrete decisions on rate cuts are unlikely until the ECB's September meeting, though analysts predict a response should the tariff be imposed.

(With inputs from agencies.)