ECB cuts benchmark interest rate by quarter point as Trump tariffs threaten economy
FRANKFURT, Germany (AP) — The European Central Bank cut its benchmark interest rate for an eighth time, aiming to support businesses and consumers with more affordable borrowing as U.S. President Donald Trump's trade war threatens to slow already tepid growth.
The bank's rate-setting council cut interest rates by a quarter of a point Thursday at the bank's skyscraper headquarters in Frankfurt. Analysts expected a cut, given the gloomier outlook for growth since Trump announced a slew of new tariffs April 2 and subsequently threatened to impose a crushing 50% tariff, or import tax, on European goods.
The bigger question remains how far the bank will go at subsequent meetings. Bank President Christine Lagarde indicated at a post-decision news conference that much depends on whether trade tensions with the U.S. can be resolved.
'A further escalation in global trade tensions and associated uncertainties could lower euro area growth by dampening exports and dragging down investment and consumption,' Lagarde said. 'By contrast, if trade and geopolitical tensions were resolved swiftly, this could lift sentiment and spur activity. A further increase in defense and infrastructure spending, together with productivity enhancing reforms, would also add to growth.'
While the trade war and the uncertainty that goes with it is holding back growth, the ECB said the economy should get additional stimulus from higher government spending on defense and infrastructure. European governments are stepping up plans for defense purchases to counter Russia and its invasion of Ukraine. The spending boosts arrive amid concern that the U.S. is no longer a fully committed ally in support of Ukraine.
U.S. Defense Secretary Pete Hegseth did not attend a recent meeting of allied nations created to organize Ukraine's military aid. It was the first time the U.S. was not present since the group was set up three years ago. Hegseth's predecessor, Lloyd Austin, created the group after Russia launched all-out war on Ukraine in 2022.
Given the different possible outcomes the bank said that it was 'not committing to a particular rate path' for future policy meetings.
Thursday's decision took the bank's benchmark rate to 2%, down from a peak of 4% in 2023-24.
The bank raised rates to suppress an outbreak of inflation in 2021-23 that was triggered by Russia's invasion of Ukraine, and by the rebound from the pandemic. But as inflation fell, the bank shifted gears toward supporting growth by lowering rates. With inflation now down to 1.9%, below the bank's target of 2%, analysts say the bank has room to take rates even lower to support growth.
Trump announced a 20% tariff, or import tax, on goods from the European Union. He later threatened to raise the tariff to 50% after expressing dissatisfaction with the progress of trade talks with the EU's executive commission, which handles trade issues for the 27-member union. Trump and the EU's executive commission have agreed to suspend implementation and any retaliation by the EU until July 14 as negotiators seek to reach agreement.
Trump added more disruption this week by suddenly increasing a 25% tariff on steel imports to 50% for all countries except for the U.K. The threat of even higher tariffs has raised fears that growth will underperform already modest forecasts. The EU's executive commission lowered its growth forecast for this year to 0.9% from 1.3% on the optimistic assumption that the 20% tariff rate can be negotiated down to no more than 10%.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Toronto Star
5 minutes ago
- Toronto Star
Democratic states double down on laws resisting Trump's immigration crackdown
As President Donald Trump's administration targets states and local governments for not cooperating with federal immigration authorities, lawmakers in some Democratic-led states are intensifying their resistance by strengthening state laws restricting such cooperation. In California alone, more than a dozen pro-immigrant bills passed either the Assembly or Senate this week, including one prohibiting schools from allowing federal immigration officials into nonpublic areas without a judicial warrant.
Winnipeg Free Press
14 minutes ago
- Winnipeg Free Press
Democratic states double down on laws resisting Trump's immigration crackdown
As President Donald Trump's administration targets states and local governments for not cooperating with federal immigration authorities, lawmakers in some Democratic-led states are intensifying their resistance by strengthening state laws restricting such cooperation. In California alone, more than a dozen pro-immigrant bills passed either the Assembly or Senate this week, including one prohibiting schools from allowing federal immigration officials into nonpublic areas without a judicial warrant. Other state measures have sought to protect immigrants in housing, employment and police encounters, even as Trump's administration has ramped up arrests as part of his plan for mass deportations. In Connecticut, legislation pending before Democratic Gov. Ned Lamont would expand a law that already limits when law enforcement officers can cooperate with federal requests to detain immigrants. Among other things, it would let 'any aggrieved person' sue municipalities for alleged violations of the state's Trust Act. Two days after lawmakers gave final approval to the measure, the U.S. Department of Homeland Security included Connecticut on a list of hundreds of 'sanctuary jurisdictions' obstructing the enforcement of federal immigration laws. The list later was removed from the department's website after criticism that it errantly included some local governments that support Trump's immigration policies. States split on whether to aid or resist Trump Since taking office in January, Trump has enlisted hundreds of state and local law enforcement agencies to help identify immigrants in the U.S. illegally and detain them for potential deportation. U.S. Immigration and Customs Enforcement now lists 640 such cooperative agreements, a nearly fivefold increase under Trump. Trump also has lifted longtime rules restricting immigration enforcement near schools, churches and hospitals, and ordered federal prosecutors to investigate state or local officials believed to be interfering with his crackdown on illegal immigration. The Department of Justice sued Colorado, Illinois and New York, as well as several cities in those states and New Jersey, alleging their policies violate the U.S. Constitution or federal immigration laws. Just three weeks after Colorado was sued, Democratic Gov. Jared Polis signed a wide-ranging law expanding the state's protections for immigrants. Among other things, it bars jails from delaying the release of inmates for immigration enforcement and allows penalties of up to $50,000 for public schools, colleges, libraries, child care centers and health care facilities that collect information about people's immigration status, with some exceptions. Polis rejected the administration's description of Colorado as a 'sanctuary state,' asserting that law officers remain 'deeply committed' to working with federal authorities on criminal investigations. 'But to be clear, state and local law enforcement cannot be commandeered to enforce federal civil immigration laws,' Polis said in a bill-signing statement. Illinois also has continued to press pro-immigrant legislation. A bill recently given final approval says no child can be denied a free public education because of immigration status — something already guaranteed nationwide under a 1982 U.S. Supreme Court decision. Supporters say the state legislation provides a backstop in case court precedent is overturned. The bill also requires schools to develop policies on handling requests from federal immigration officials and allows lawsuits for alleged violations of the measure. Legislation supporting immigrants takes a variety of forms Democratic-led states are pursuing a wide range of means to protect immigrants. A new Oregon law bars landlords from inquiring about the immigration status of tenants or applicants. New laws in Washington declare it unprofessional conduct for bail bond agents to enforce civil immigration warrants, prohibit employers from using immigration status to threaten workers and let employees use paid sick leave to attend immigration proceedings for themselves or family members. Vermont last month repealed a state law that let law enforcement agencies enter into immigration enforcement agreements with federal authorities during state or national emergencies. They now need special permission from the governor to do so. As passed by the House, Maryland legislation also would have barred local governments from reaching immigration enforcement agreements with the federal government. That provision was removed in the Senate following pushback from some of the seven Maryland counties that currently have agreements. The final version, which took effect as law at the start of June, forbids public schools and libraries from granting federal immigration authorities access to nonpublic areas without a judicial warrant or 'exigent circumstances.' Maryland Del. Nicole Williams said residents' concerns about Trump's immigration policies prompted her to sponsor the legislation. 'We believe that diversity is our strength, and our role as elected officials is to make sure that all of the residents within our community — regardless of their background — feel safe and comfortable,' Williams said. Many new measures reinforce existing policies Though legislation advancing in Democratic states may shield against Trump's policies, 'I would say it's more so to send a message to immigrant communities to let them know that they are welcome,' said Juan Avilez, a policy associate at the American Immigration Council, a nonprofit advocacy group. In California, a law that took effect in 2018 already requires public schools to adopt policies 'limiting assistance with immigration enforcement to the fullest extent possible.' Some schools have readily applied the law. When DHS officers attempted a welfare check on migrant children at two Los Angeles elementary schools in April, they were denied access by both principals. Legislation passed by the state Senate would reinforce such policies by specifically requiring a judicial warrant for public schools to let immigration authorities into nonpublic areas, allow students to be questioned or disclose information about students and their families. 'Having ICE in our schools means that you'll have parents who will not want to send their kids to school at all,' Democratic state Sen. Scott Wiener said in support of the bill. But some Republicans said the measure was 'injecting partisan immigration policies' into schools. 'We have yet to see a case in California where we have scary people in masks entering schools and ripping children away,' said state Sen. Marie Alvarado-Gil. 'Let's stop these fear tactics that do us an injustice.' ___ Associated Press writers Susan Haigh, Trân Nguyễn, Jesse Bedayn, John O'Connor and Brian Witte contributed to this report.
Winnipeg Free Press
an hour ago
- Winnipeg Free Press
Many Canadians losing confidence in future of trade relationship with U.S.: Poll
OTTAWA – Almost two in five Canadians say recent court rulings in the U.S., and the ongoing legal battle over President Donald Trump's tariffs, have made them feel less confident in the future of trade relations, a new poll suggests. The poll suggests that 38 per cent of Canadians say they feel less confident now about the future of Canada-U.S. trade as well as trade between the U.S. and other countries. Sixteen per cent of Canadian respondents say they feel more confident, while 37 per cent say their level confidence in the future of the trade relationship hasn't changed. The Leger poll, which was conducted online and can't be assigned a margin of error, surveyed more than 1,500 people between May 30 and June 1. The poll also surveyed more than 1,000 Americans. Their responses to the poll were substantially similar. Thirty-six per cent of American respondents said the recent court rulings and the ongoing legal battle over Trump's tariffs made them feel less confident about the future of trade with Canada and with the rest of the world. Another 19 per cent reported feeling more confident and 31 per cent said their opinion hadn't changed. Trump's tariffs are still hitting most countries around the world after a federal appeals court temporarily paused a decision last week by the U.S. Court of International Trade to block his tariffs. The court said Trump went beyond his authority when he used the International Emergency Economic Powers Act of 1977 to take his trade war to the world. A federal appeals court granted the Trump administration's emergency motion for a temporary stay, allowing those tariffs to stay in place for now. The poll suggests that Albertans are reporting the lowest level of confidence in the state of trade relations — 48 per cent of them told Leger they feel less confident about the future of Canada—U.S. and U.S.–international trade relations. That's compared to 38 per cent of Quebecers, 37 per cent of Ontarians and 35 per cent of people in B.C. Among Canadians 55 years of age and older, 43 per cent reported feeling less confident in trade relations; just 33 per cent of Canadians aged 18 to 34 said the same. More women than men said they were losing confidence. While many Canadians expressed concern about the future of trade relationships, many also said the fact that U.S. courts are trying to limit Trump's impact on trade policy increases their trust in America's institutions. The poll suggests that 45 per cent of Canadians say their trust in U.S. democratic institutions has increased, while 17 per cent say it has decreased. Almost a third of Canadians said it has had no impact on their opinion. Quebecers were the most likely to say their trust had increased, at 54 per cent, compared to 45 per cent of people in B.C., 43 per cent of Ontarians and 39 per cent of Albertans. Canadians aged 55 and over were more likely to say their trust had increased than younger Canadians. Among the Americans surveyed, 38 per cent said the fact that U.S. courts are trying to limit Trump's trade powers increases their trust in U.S. democratic institutions. Another 24 per cent said it decreases their trust and 26 per cent said it had no impact on their opinion. Andrew Enns, Leger's executive vice-president for Central Canada, said that if there had been only one ruling — the one that blocked the tariffs — the confidence levels recorded by the poll might have been higher. 'There was a second ruling and I think, if anything, it's left people a bit uncertain about the situation,' Enns said, noting that levels of concern seemed to be higher earlier in the year. 'I think the confidence, it's going to take some time to rebuild that.' The polling industry's professional body, the Canadian Research Insights Council, says online surveys cannot be assigned a margin of error because they do not randomly sample the population. — With files from David Baxter and Kelly Geraldine Malone This report by The Canadian Press was first published June 6, 2025.
