ECB chief says global economy could suffer if Trump undermines Fed
A US appeals court ruling that most of US President Donald Trump’s tariffs are illegal has intensified questions about trade policy and monetary stability, raising concerns for the global economy.
The 7-4 decision by the US Court of Appeals for the Federal Circuit in Washington, DC, addressed both “reciprocal” tariffs imposed in April and a separate set of levies against China, Canada, and Mexico in February, Reuters reported.
The court allowed the tariffs to remain in place through October 14 while the administration appeals to the Supreme Court.
US Treasury Secretary Scott Bessent said he was confident the Supreme Court would uphold Trump’s use of the 1977 International Emergency Economic Powers Act (IEEPA) to justify the tariffs.
“I’m confident the Supreme Court will uphold it – will uphold the president’s authority to use IEEPA. And there are lots of other authorities that can be used – not as efficient, not as powerful,” Bessent told Reuters.
He added that Section 338 of the Smoot-Hawley Tariff Act of 1930 could be used as an alternative to impose tariffs of up to 50 percent for five months.
Bessent said the administration’s legal brief would argue that US trade deficits were reaching a “tipping point” and that fentanyl imports posed a national emergency.
“If this is not a national emergency, what is?” he said, pointing to 70,000 annual US deaths linked to fentanyl overdoses. He compared the situation to George W. Bush’s pre-crisis intervention in mortgages ahead of the 2008-2009 financial collapse.
European Central Bank President Christine Lagarde warned that Trump’s efforts to weaken the independence of the US Federal Reserve would be a “very serious danger” for both the US and world economy, as reported by Reuters.
She told Radio Classique that if monetary policy became subject to political dictates, global stability would be at risk. Lagarde added that the US court ruling against Trump’s tariffs was adding “a further layer of uncertainty” to the global outlook.
Trump has repeatedly criticised Federal Reserve Chair Jerome Powell for not cutting rates and is attempting to remove Governor Lisa Cook.
The US Federal Reserve’s current benchmark stands at 4.25 to 4.5 percent, while Trump has pushed for a reduction to less than 1 percent, the BBC reported.
CNBC noted that critics warned these actions risk undermining central bank credibility and could open the door to inflationary instability similar to episodes seen in other countries where monetary policy became politicised.
Bessent dismissed suggestions that Trump’s tariffs were strengthening ties among Russia, China, and India, describing a recent Shanghai Cooperation Organization gathering as “performative.”
He said Europe was moving closer to Washington’s stance by backing a 25 percent tariff on India’s Russian oil imports but did not indicate if similar pressure would be directed toward China.
