Tariffs threatened to be a third inflation shock for Europe, but have had little impact

What seemed set to follow Covid-19 and Russia's invasion of Ukraine as a major inflation shock hasn't materialized, at least not yet.

- Paul Hannon

Various Trump effects have cancelled each other out.

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For Europe's central bankers, President Trump's tariff blitz has been a bit of a nonevent.

Since the tariffs were introduced in early April, the European Central Bank has lowered its key rate twice and to the point where policymakers judge it is no longer restraining economic activity, but gone no further.

The Bank of England is on a path to that neutral destination, but maintaining the same steady pace it adopted well before the tariffs were announced. Even Switzerland, which faces some of the highest tariffs to be levied by the president, has declined to hit the panic button.

‘What at one point seemed set to be a third big inflation shock this decade—after the Covid-19 pandemic and Russia’s full-scale invasion of Ukraine—appears to have been of little consequence for consumer prices, or monetary policy, at least not yet.

The ECB last week signaled that it is not expecting to change its key interest rate again this year, even as the 15% tariff that the U.S. has imposed on most imports from the eurozone ripple through the currency area's economy.