European Central Bank official: U.S. tariffs may trigger deflationary effects in the eurozone, leading to a shift from U.S. dominance to a multipolar system.

European Central Bank executive board member Chiapporini said that the trade measures taken by the United States may drag down Eurozone inflation in the short term, as they will impede global economic expansion. Chiapporini said on Tuesday, "The medium-term impact might lead to a decrease in Eurozone inflation, as actual interest rates in Eurozone have risen after the US imposed tariffs, causing the Euro to appreciate." "Trade measures can shift resources from high productivity sectors to low productivity sectors, causing the same inefficiencies as in the 20th century, and this contraction effect may lead to a continued decline in global growth rates." Since Trump announced tariffs, the strengthening of the Euro may be the biggest surprise for policymakers. They originally expected the Euro to depreciate, increasing import costs, and the EU's retaliatory measures may push up inflation. Chiapporini said, "The Eurozone benefits from inflows of safe-haven funds, with nominal bond yields declining as the Euro appreciates." He also mentioned a possibility that trade differentiation may lead to a transition from the "US-dominated global system to a more multipolar system, where multiple currencies compete for reserve status."