31 Mar
EACC

OECD | Global Economic Outlook Remains Robust but has Weakened Amid Energy Shock and Geopolitical Risks

The resilience of the global economy is being tested by the evolving conflict in the Middle East, which has generated new inflationary pressures while creating significant uncertainty, according to the OECD’s latest Interim Economic Outlook.
Global growth was steady heading into 2026, supported by the strength of technology-related production, lower effective tariffs on US imports and the momentum carried over from 2025. The energy supply shock following the onset of the conflict in the Middle East is expected to significantly weigh on global growth while putting new upward pressure on inflation.
As a result of these developments, the Outlook projects global growth of 2.9% in 2026 and 3.0% in 2027. The evolution of the conflict in the Middle East is highly uncertain and poses considerable risks to these baseline projections. A more long-lasting disruption, with energy prices remaining elevated beyond mid-2026, would further reduce growth prospects.
GDP growth in the United States is projected at 2.0% in 2026, before moderating to 1.7% in 2027. In the euro area, growth is projected to be 0.8% in 2026 and 1.2% in 2027. China’s growth is projected to slow to 4.4% in 2026 and 4.3% in 2027.
Inflation pressures will persist for a longer period, with inflation now expected to be higher in 2026 than previously projected, reflecting the surge in global energy prices. Headline inflation in G20 countries is projected to be 4.0% in 2026, easing to 2.7% in 2027. Click here to see the projections

“The energy supply shock from the evolving conflict in the Middle East is testing the resilience of the global economy. We project global growth will remain robust, but it will be slower than the pre-conflict trajectory, with significantly higher inflation,” OECD Secretary-General Mathias Cormann said. “Any policy measures adopted to cushion the impact of the energy price shock should be targeted towards those most in need, temporary, and ensure incentives to save energy are preserved. Increasing renewable energy generation and energy efficiency can enhance economic security while boosting resilience to future price shocks.”
The Outlook highlights a range of risks. The expected decline in future energy prices is based on assumptions that current disruptions to supply will ease over time, and be limited in 2027. Longer-lasting closure of oil and gas production facilities in the region or persistent disruptions to exports through the Strait of Hormuz would likely have more significant adverse consequences on energy prices, inflation expectations and future growth.
The Outlook points out that higher energy and fertiliser prices could spur increases in food prices, particularly affecting vulnerable households. Higher energy prices could also increase the cost for European countries carrying out necessary annual replenishing of natural gas stocks. Financial markets may experience additional volatility while rising long-term sovereign yields increase fiscal risks.
Given these challenges, the Outlook highlights key priorities for policymakers. Central banks should remain vigilant and ensure expectations are well-anchored. Stronger efforts are needed to safeguard the sustainability of public finances. Any measures to cushion the economic impact of the energy shock will need to be targeted, temporary and take into account limited fiscal space facing most governments. Lowering trade barriers would boost output and reduce inflationary risks. Over the medium term, improving energy efficiency and reducing dependency on fossil fuel imports can lower exposure to future supply shocks.
For the full report and more information, consult the Interim Economic Outlook online. Media queries should be directed to the OECD Media Office (+33 1 45 24 97 00).
Watch the live webcast of the press conference

Working with over 100 countries, the OECD is a global policy forum that promotes policies to preserve individual liberty and improve the economic and social well-being of people around the world.

 
 
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30 Mar
EACC & Member News

Ebury: Flight to safety accelerates as Iran war escalates

The prospect of a prolonged conflict of uncertain outcome sent stocks, bonds and almost all currencies except the dollar down. The sell off accelerated into the Friday close and continued in early Asian trading on Monday. Energy prices are spiking and dragging other commodities upward; these are the only major asset classes benefiting from the situation. Macroeconomic data around the world is starting to reflect the war’s consequences – higher inflation and lower growth.

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30 Mar
EACC

IMF | How the War in the Middle East is Affecting Energy, Trade, and Finance

Energy prices, supply chains, and financial markets are the main transmission channels, but the regional effects will vary significantly.
The world faces yet another shock. The war in the Middle East is upending lives and livelihoods in the region and beyond. It is also dimming the outlook for many economies that had only just shown signs of a sustained recovery from previous crises.
The shock is global, yet asymmetric. Energy importers are more exposed than exporters, poorer countries more than richer ones, and those with meager buffers more than those with ample reserves.
Beyond its painful human toll, the war has caused serious disruption to the economies of the most directly affected countries, including damage to their infrastructure and industries that could become long-lasting. Although these countries are resilient, their short-term growth prospects will be negatively affected.
Meanwhile, large energy importers in Asia and Europe are bearing the brunt of higher fuel and input costs: about 25 to 30 percent of global oil and 20 percent of liquefied natural gas pass through the Strait of Hormuz, feeding demand not only in Asia but also in parts of Europe. Economies heavily dependent on oil imports in Africa and Asia are finding it increasingly hard to access the supplies they need, even at inflated prices.
Parts of the Middle East, Africa, Asia-Pacific, and Latin America face the added strain of higher food and fertilizer prices and tighter financial conditions. Low-income countries are especially at risk of food insecurity; some may need more external support—even as such assistance has been declining.

Although the war could shape the global economy in different ways, all roads lead to higher prices and slower growth. A short conflict might send oil and gas prices soaring before markets adjust, while a long one could keep energy expensive and strain countries that rely on imports. Or the world may settle somewhere in between—tensions linger, energy stays costly, and inflation proves hard to tame—with ongoing uncertainty and geopolitical risk. Much depends on how long the conflict lasts, how far it spreads, and how much damage it inflicts on infrastructure and supply chains.
We are closely monitoring these developments and will provide a fuller assessment in our World Economic Outlook and Global Financial Stability Report, to be published on April 14, followed by our Fiscal Monitor on April 15.
Energy prices
Energy is the main transmission channel. The de facto closure of the Strait of Hormuz and damage to regional infrastructure have produced the largest disruption to the global oil market in its history, according to the International Energy Agency. For fuel‑importing economies, the effect is that of a large, sudden tax on income.

The multi-regional impact is apparent. Energy‑importing economies in Africa, the Middle East and Latin America are feeling the strain from higher import bills on top of already limited fiscal space and external buffers.
In Asia’s large manufacturing economies, higher fuel and power bills are raising production costs and squeezing people’s purchasing power; in some, balance‑of‑payments pressures are already weighing on currencies. In Europe, the shock is reviving the specter of the 2021–22 gas crisis, with countries such as Italy and the United Kingdom especially exposed by their reliance on gas‑fired power, while France and Spain are relatively protected by their greater nuclear and renewables capacity.
By contrast, oil‑exporting countries in the Middle East, parts of Africa, and Latin America that can still get their barrels to market have a prospect of stronger fiscal and external positions from higher prices. Producers whose exports are constrained or curtailed—including several Gulf Cooperation Council members—can expect much less upside. Even after transit resumes, higher risk premia and uncertainty may curb investment and growth.
Supply chains
The war is also reshaping supply chains for non-energy and critical inputs. Rerouting tankers and container ships raises freight and insurance costs and lengthens delivery times. Air‑traffic disruptions around key Gulf hubs impact global tourism while adding another layer of complexity to trade.
In addition to higher commodity prices, countries, companies, and consumers already face the effects of these supply‑chain complications. With shipments of fertilizer—of which about one-third passes through the Strait of Hormuz—disrupted, concerns about food prices are mounting. The interruption of crop-nutrient supplies from the Gulf comes just as planting season begins in the Northern Hemisphere, threatening yields and harvests through the year and pushing food prices higher.
The most vulnerable will bear the heaviest burden. People in low‑income countries are most at risk when prices rise because food accounts for about 36 percent of consumption on average, compared with 20 percent in emerging market economies and 9 percent in advanced economies. That makes any spike in fertilizer and food prices not just an economic problem but a socio-political one, especially where fiscal resources to cushion the blow are limited.
There could also be shortages or price surges of other materials used in manufacturing. The Gulf supplies a large share of the world’s helium, used in a vast array of products from semiconductors to medical imaging devices. Indonesia, which provides roughly half of global nickel—a key component in electric‑vehicle batteries—could face a shortage of sulfur needed to process the metal. Eastern African economies that depend on trade links with and remittances from Gulf countries face weaker demand for their services exports, logistical bottlenecks and reduced remittances.
Inflation and inflation expectations
If elevated energy and food prices persist, they will fuel inflation worldwide. Historically, sustained oil‑price spikes have tended to push inflation higher and growth lower. Over time, higher transport and input costs work their way into the prices of manufactured goods and services. For many countries that had only just brought inflation closer to target, and even more so those with stickier inflation, this risks a renewed period of uncomfortable price pressures.
Here, too, the pattern is uneven. In much of Asia and parts of Latin America, where inflation had been relatively low, higher energy and food costs will test the resilience of expectations, particularly in economies with weaker currencies and large energy imports. In Europe, another energy‑driven spike in prices would come on top of existing cost‑of‑living strains, raising the risk of more persistent wage demands. In low‑income countries where people spend a large share of their income on food, especially in Africa and parts of the Middle East, and Central America higher food prices carry acute social and economic costs.
If people and businesses in any of these regions believe inflation will remain higher for longer, they may build this into wages and prices, making it harder to contain the shock without a sharper slowdown. The war thus raises not only current inflation but also a risk of expectations becoming less firmly anchored.
Financial conditions
Finally, the war has unsettled financial markets. Global stock prices have declined, bond yields have risen across major advanced economies and many emerging markets, and volatility has increased. The market sell-off has so far been contained compared with past global shocks. Nonetheless, these moves have tightened financial conditions worldwide.
Again, effects vary. In Europe and many emerging markets, higher yields and wider credit spreads raise debt‑service burdens and complicate refinancing for governments and firms alike. In sub‑Saharan Africa and some low‑income economies in the Middle East and South Asia, already meager reserves and limited market access make external shocks to financing conditions more dangerous—especially as higher import bills for fuel, fertilizer, and food widen trade deficits and put pressure on currencies. In the Middle East and elsewhere, high levels of debt and tighter financial conditions may further raise debt financing costs.
By contrast, advanced economies with deep domestic capital markets and some commodity exporters with ample buffers—such as Saudi Arabia and United Arab Emirates, or Latin American commodity producers like Brazil and Ecuador—can better absorb market stress, even if they are not immune to higher risk premia.
The IMF’s role
These channels show why the war’s economic impact is both global and highly uneven. They help explain why the same shock can look like a terms‑of‑trade windfall for some countries, a balance‑of‑payments strain for others, and a renewed cost‑of‑living squeeze across many economies.
Such complex spillovers confront us at a time when many economies have limited room to absorb shocks. Many countries were already facing record-high debt levels, raising concerns about fiscal sustainability.
To manage the shock and maintain resilience, it is therefore more important than ever that countries adopt appropriate policies. Measures need to be carefully calibrated to country-specific needs. Countries with limited reserves and little fiscal room to maneuver should be especially cautious.
At this pivotal moment, the IMF is stepping up as well. We are supporting our members—especially the most vulnerable—with policy advice, capacity development and, where needed and in coordination with the international community, financial assistance. As Managing Director Kristalina Georgieva has said: “In an uncertain world, more countries are needing more of our support. We are there for them.”
 
 
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30 Mar
EACC

ECB | Where do the Costs of Higher US Tariffs Fall?

Understanding the impact of tariffs on inflation is a complex task as it involves analysing responses along the pricing chain, including those by foreign exporters, distributors, producers and retailers. At different stages of this pricing chain, domestic firms could respond to tariff announcements by building up inventories before tariffs are implemented, shifting the sourcing of their imports from countries facing higher tariffs to countries facing lower tariffs (trade diversion) and adjusting the pricing of their products to accommodate the impact of tariffs. This analysis is made all the more intricate by exchange rate developments and exemptions for goods in transit at the time of tariff implementation. In this box, we estimate the impact of recently imposed US tariffs on the prices exporters are charging for products delivered to the United States and explore differences in the pricing behaviour of exporters across countries and sectors observed to date. We show that the costs of tariffs are falling mostly on US firms and consumers and only 5% of costs are borne by foreign firms.
Following a series of tariff increases imposed by the United States, both the prices (net of tariffs) and the volumes of goods it imports have been declining. From January to November 2025, the announced statutory effective tariff rate increased significantly from 3% to over 18%.[1] The annual change in the prices of goods imported into the United States, measured as unit values and reported net of tariffs, has been slightly negative since April. Volumes of imported goods have declined sharply. However, the magnitude of the adjustments in prices and quantities varies across major trading partners, such as China, Canada, Mexico and the EU, which were targeted by higher tariffs. These differences could reflect variations in tariff rates and scope, shifts in the composition of imports and country-specific dynamics.
Exporters to the United States are absorbing only a small fraction of higher tariff-related costs. In aggregate, unit values of imported goods reported net of tariffs show an average pass-through coefficient of 0.95 (Chart A, panel a).[2] This means that a 10% increase in tariffs implies only a 9.5% increase in prices. Therefore, only a small fraction of the increased tariffs is being absorbed by exporters.[3] The pass-through coefficient is significantly lower when looking at specific sectors.[4] However, no significant differences are evident in the estimated tariff pass-through by major trading partners.

Chart A
Impact of tariffs on unit values and volumes of imported goods

a) Unit values of imported goods
(elasticity; complete pass-through = 1)

b) Volumes of imported goods
(elasticity)

Source: ECB staff calculations.
Notes: The reported estimates are based on a panel regression analysis of six-digit product categories of the harmonised system (HS6) import unit values, following the methodology of Amiti et al. (2019). Estimated on a sample from January 2024 to October 2025. The upper part of panel b) reports estimates of the aggregate elasticity (extensive and intensive margin) obtained from a regression where product categories, including those subject to higher tariffs, are no longer imported into the United States. The lower part of panel b) reports estimates obtained from a regression on those product categories which are still traded under tariffs.

The estimated impact of tariffs on import volumes is large. The estimated aggregate elasticity of imports for all product categories stands at -3.7. This means that a 10% increase in tariffs would result in a 37% decline in import volumes. If, by contrast, we focus on only those product categories which are still traded under tariffs, the estimated coefficient declines markedly, albeit remaining economically relevant at ‑0.43. This means that a 10% increase in tariffs would result in a 4.3% decline in import volumes. This difference in estimated elasticity for import volumes suggests that the observed decline is largely associated with products which, in response to tariffs, are no longer traded – meaning they undergo an adjustment through the extensive margin (Chart A, panel b, upper graph). However, volumes also decline markedly for products which are still being traded under tariffs (trade adjustment through the intensive margin; Chart A, panel b, lower graph).
Zooming in on the automotive sector highlights how tariffs triggered significant changes in trade structures, particularly within regional supply chains. In the automotive sector, the results point to a clear decoupling of the United States from China and the EU in favour of Canada and Mexico (Chart B). The surge in car imports from Canada and Mexico reflects a strengthening of existing trade relationships.[5] This stands in sharp contrast to the results reported for the EU and Japan, which saw both a contraction in the unit value of exported cars and a strong decline in the volume of products subject to tariffs and still exported to the United States.[6]

Chart B
Impact of tariffs on unit values and volumes of cars imported to the United States

a) Unit values of imported cars

b) Volumes of imported cars

(elasticity; complete pass-through = 1)

(aggregate elasticity)

Source: ECB staff calculations.
Notes: The reported estimates are based on a panel regression analysis of six-digit product categories of the harmonised system (HS6) import unit values, following the methodology of Amiti et al. (2019). Estimated on a sample from January 2024 to October 2025.

While tariffs are reshaping the geography of trade relations with the United States, their costs are falling mostly on domestic importers and consumers. We find that costs associated with higher tariffs are passed down the pricing chain, with consumers currently bearing around a third of the tariff burden (Chart C). And if the higher tariffs are expected to stay in place for a longer period, the available survey evidence from US firms suggests that they will pass a larger share of tariff-related costs on to consumers. Over the longer term, this share could rise to over half as US firms exhaust their ability to absorb costs. Additionally, if the extent to which exporters absorb tariffs remains limited in scope, as reported above, this implies that US firms would absorb around 40% of higher tariff costs in the longer term.

Chart C
Distribution of tariff-implied costs along the pricing chain

(coefficient estimates)

Source: ECB staff calculations.
Notes: The chart shows how tariff costs are distributed across the pricing chain, based on empirical analyses using data available up to August 2025 (dark blue). The grey bars represent residual attributions, with hashed sections indicating survey results from Andrade et al. (2025), which suggest that the tariff pass-through to consumers increases to 0.55 when in place over longer time horizons. The figure for consumers is derived from a panel regression of tariffs on personal consumption expenditures PCE components, while the figure for exporters is based on a panel regression analysis of six-digit product categories of the harmonised system (HS6) import unit values, following the methodology of Amiti et al. (2019). “Firms” refers to distributors, producers and retailers.

References
Amiti, M., Redding, S.J. and Weinstein, D.E. (2019), “The Impact of the 2018 Tariffs on Prices and Welfare”, Journal of Economic Perspectives, Vol. 33, No 4, pp. 187-210.
Amiti, M., Flanagan, C., Heise, S. and Weinstein, D.E. (2026), “Who Is Paying for the 2025 U.S. Tariffs?”, Liberty Street Economics, Federal Reserve Bank of New York, 12 February.
Andrade, P., Dietrich, A.M., Leer, J., Lin, X., Schoenle, R.S., Tang, J. and Zakrajšek, E. (2025), “Who Will Pay for Tariffs? Businesses’ Expectations about Costs and Prices”, Current Policy Perspectives, No 25-13, Federal Reserve Bank of Boston, 29 September.
Hinz, J., Lohmann, A., Mahlkow, H. and Vorwig, A. (2026), “America’s Own Goal: Who Pays the Tariffs?”, Kiel Policy Brief, No 201, Kiel Institute for the World Economy.
Le Roux, J. and Spital, T. (2026), “Global trade redirection: tracking the role of trade diversion from US tariffs in Chinese export developments”, Economic Bulletin, Issue 1, ECB.

There is a difference between statutory and actual effective tariff rates. The statutory effective tariff rate is calculated based on tariff announcements and a usually fixed trade structure, whereas the actual tariff rate is derived from customs data and is typically lower. The World Trade Organization reports in its tariff tracker that the statutory effective tariff rate on goods for the United States was 18.2% in November 2025, whereas the actual effective tariff rate on goods for the same month was 9.8%. For economic analysis, the statutory effective tariff rate is typically used as the explanatory variable as the implementation date is judged to be more relevant compared with customs reports data, which often suffer from reporting lags and endogeneity bias caused by changing trade volumes triggered by tariffs.

Aggregate effects are captured through time fixed effects, while product-level characteristics are controlled for by including item fixed effects following Amiti et al. (2019). The tariff effect is identified by the common movement of the dependent price variable in response to tariff changes within all items across time.

This finding is broadly consistent with the evidence from the 2018-19 period as documented in Amiti et al. (2019). It is also in line with the available estimates for the current tariffs (Hinz et al., 2026), suggesting that the United States possesses limited terms-of-trade leverage over its global suppliers in the short term. While Amiti et al. (2026) report a similar tariff pass-through (elasticity) of 0.94 for the period from January to August 2025, they find it declined to 0.86 in November.

Steel and aluminium, cars and car parts were targeted early on by the US Administration and faced significant tariffs ranging from 25% to 50%, with few exemptions.

Rerouting of Chinese car exports via these countries may have contributed to these developments, although recent analyses suggest that Chinese exports may have been rerouted through countries in the Association of Southeast Asian Nations. For further details, see Le Roux and Spital (2026).

The estimated elasticity on the trade volume at the intensive margin is 0.84 for Canada and Mexico and ‑1.26 for the EU.

 
 
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27 Mar
EACC

European Council | EU customs: Council and Parliament Agree on Landmark Reform

The Council and the Parliament today agreed to overhaul the EU customs framework, giving the Union a more modern toolbox to deal with trends such as huge increases in trade volumes, especially in e-commerce, a fast-growing number of EU standards that must be checked at the border and challenging geopolitical realities.
The reform establishes innovative new instruments to facilitate global trade, collect customs duties more efficiently and to tighten controls on non-compliant, dangerous or unsafe goods. Overall, the new system will allow for more robust controls without excessive burden for authorities and traders.

“Today’s agreement marks the greatest reform since the creation of the Customs Union in 1968. The new Union customs code will allow us to deal with the multiple challenges prompted by the new geopolitical realities, while ensuring economic security. Once adopted, this modern toolbox will facilitate trade and ensure the proper collection of duties, in a simplified manner, and with the required legal certainty.” – Makis Keravnos, Minister of Finance of the Republic of Cyprus

The co-legislators have agreed on legislation to:

create a single, state-of-the-art EU customs data hub: one central platform for importers and exporters to interact with customs in the EU, strengthening data integrity, traceability and customs controls
introduce enhanced customs simplifications for the most trusted traders, saving them time and money
implement a new EU-wide handling fee for items contained in small parcels entering the EU
establish a new decentralised agency for customs – the EU customs authority – which will oversee the EU customs data hub while supporting the risk management work of national customs authorities.

The EU customs authority
The new decentralised EU agency for customs will coordinate governance of the EU customs union in certain areas.
To support the work of national offices, the EU customs authority will analyse the constantly updated import and export data contained in the new EU customs data hub, helping to identify the riskiest cargo entering the EU which should be prioritised for inspection.
The authority will also help establish priority control areas and risk criteria. Finally, it will coordinate EU-level crisis management in the area of customs.
The customs authority will be located in Lille, France. It will be established on the day that the overarching regulation enters into force.
The EU customs data hub
The EU customs data hub will be the single online environment designed to collect and analyse customs data to ensure the smooth flow of goods in and out of the EU. It will also support the EU-wide risk management carried out by the EU customs authority.
To fulfil their customs obligations, businesses importing to and exporting from the EU will only need to submit customs information once to this single portal, rather than to up to 27 individual customs authorities. They can enter the same information to cover multiple consignments, saving time and money.
National customs authorities will gain a full overview of trade flows and supply chains. With the support of the EU customs authority, member states will have access to the same real-time data and will be able to pool information to respond to risks more quickly, consistently and effectively.
Under the terms of the agreement, the data hub will become operational for e-commerce goods on 1 July 2028. A phased rollout will bring all movements of goods into its scope by 1 March 2034.
Trust and check traders
The updated legislation creates a new category of the most transparent businesses – trust and check traders.
Under this scheme, companies providing comprehensive information on the movement and compliance of goods, along with other stringent criteria, will enjoy more streamlined customs obligations, such as simplified procedures for temporary storage and transit.
The most reliable companies will be able to release their goods into circulation in the EU without any active customs intervention at all.
Other companies will still be able to enjoy the already existing simplifications available to trusted traders under the current authorised economic operator scheme.
Managing the influx of small parcels
To help cover rising costs from monitoring the growing number of small parcels entering the EU via e-commerce, the agreed text introduces a new handling fee to be collected by customs authorities on small consignments sold through distance selling.
The level of the fee will be decided by Commission delegated act before it starts being applied by EU member states no later than 1 November 2026.
The new rules also clarify that platforms and those selling into the EU by distance sale, e.g. via e-commerce, are considered the goods’ importer and responsible for ensuring that all customs formalities and payments are taken care of, rather than the final EU consumer.
Finally, the legislation will include a new system of financial penalties for e-commerce operators that systematically fail to comply with their customs obligations.
Next steps
The Council and the European Parliament will continue work to finalise the technical elements of the package before final adoption by the co-legislators. The new customs legislation will come into full application 12 months following publication in the EU’s official journal.
Background
For over 50 years, the EU customs union has been operating efficiently across national borders, managed by national customs offices working together. As one of the world’s largest trading blocs, the EU customs union manages trade worth over €4.3 trillion, accounting for around 14% of global trade.
In 2024, 2,140 customs offices, working 24 hours a day and 365 days a year, collected almost €27 billion as customs duties and handled the import, export and transit of more than 1,370 million items. In the same year, EU customs authorities detected 64,000 cases of goods presenting a risk for consumers in terms of health and detained 112 million counterfeit items.
 
 
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26 Mar
EACC & Member News

Rödl: Iran war as a stress test for B2B pricing models: When “currently valid list prices” are no longer sufficient

Unternehmen mit energie‑, rohstoff- oder logistikintensiven Geschäftsmodellen stehen erneut stark unter Druck: Der Iran‑Konflikt hat die Straße von Hormus als Engpass des Welthandels in den Fokus gerückt. Über diese Meerenge läuft rund ein Fünftel des weltweiten Rohölverbrauchs und etwa 20 Prozent des LNG‑Handels; Blockaden und Angriffe führen zu massiven Preissprüngen bei Öl und Gas, aber auch bei Düngemitteln, chemischen Vorprodukten und Frachtraten.

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26 Mar
EACC

European Parliament | EU US Trade Deal: MEPs Set Conditions for Lowering Tariffs on US Products

Suspension clause in case the US introduces new tariffs
Sunrise clause: tariff preferences only effective if the US respects its commitments
Sunset clause: tariff preferences set to expire by 31 March 2028, unless renewed

On Thursday, MEPs adopted their position on two proposals implementing the tariff aspects of the EU-US Turnberry trade deal.

The texts, if agreed with EU member states, will eliminate most tariffs on US industrial goods and provide preferential market access for a wide range of US seafood and agricultural goods, in line with the commitments made in summer 2025 between the EU and the US.
Suspension clause
MEPs strengthened the proposed suspension clause, which would allow the tariff preferences with the US to be suspended under a number of conditions. For instance, the Commission would be able to propose suspending all or some trade preferences if the US were to impose additional tariffs exceeding the agreed 15% ceiling, or any new duties on EU goods. The suspension clause could also be activated if the US, for example, undermined the objectives of the deal, discriminated against EU economic operators, threatened member states’ territorial integrity, foreign and defence policies, or engaged in economic coercion.
Sunrise clause
MEPs have introduced a “sunrise clause” that would mean that the new tariffs would only become effective if the US respects its commitments. These conditions include the US lowering its tariffs on EU products with a steel and aluminium content below 50%, to a tariff of maximum 15%.
Furthermore, for EU products with a steel and aluminium content of above 50%, unless the US reduces its tariffs to a maximum of 15%, EU tariff preferences for US exports of steel, aluminium and their derivative products would cease to apply six months after the entry into application of the regulation.
Sunset clause
Members also agreed on an expiry date for the main regulation on 31 March 2028. This could only be extended via a new legislative proposal, to be submitted following a thorough impact assessment of the effects of the regulation.
Safeguard mechanism
The Commission would be tasked with monitoring the impact of the new rules and would be able to suspend the new tariffs temporarily, should US imports reach a level that could cause serious harm to EU industry, for instance in the event of a 10% increase in imports of a particular group of products.
Quote
Rapporteur Bernd Lange (S&D, DE) said: “With today’s vote, we have a strong mandate for negotiations with the Council and we intend to make the most of it. MEPs will only be able to sign up to the trade terms of the deal if the regulation contains very strong and clear safeguards, and only after the US has fully respected the terms of the deal. I intend to defend this mandate firmly in the negotiations.
The conditions are clearly defined in Parliament’s position. They include a sunrise clause requiring full US compliance before the regulation can take effect, and a sunset clause ensuring full parliamentary oversight of any extension of the concessions, all the while remaining WTO-compliant. Any further tariff threat, or the failure of the deal to deliver for EU producers and consumers, will lead to the expiry of the legislation.”
Next steps
The two legislative acts were adopted by 417 votes in favour and 154 against, with 71 abstentions (adjustment of customs duties and opening of tariff quotas for the import of certain goods originating in the US); and 437 votes in favour and 144 against, with 60 abstentions (non-application of customs duties on imports of certain goods). MEPs are now ready to start negotiations with EU governments on the final shape of the legislation.
Background
On 27 July 2025, in Turnberry, Scotland, US President Donald Trump and European Commission President Ursula von der Leyen reached a deal on tariff and trade issues, outlined in a joint statement published on 25 August. On 28 August, the Commission published two legislative proposals aimed at implementing the tariff aspects of the statement. The first provides preferential access for US goods to the EU; the second extends the existing zero-tariff regime on imports of certain types of lobster.

 
 
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25 Mar
EACC

ECB | Navigating Energy Shocks: Risks and Policy Responses

Keynote speech by Christine Lagarde, President of the ECB, at “The ECB and Its Watchers” conference organised by the Institute for Monetary and Financial Stability at Goethe University Frankfurt 
It is a pleasure to be back at the ECB Watchers Conference.
If this event had been held a few weeks ago, my speech would have been very different. The euro area economy ended the year with solid growth momentum. Inflation stood at 1.9% in February. And domestic growth engines looked to be strengthening, particularly private consumption, investment in digitalisation and defence spending.
In all likelihood, we would have revised up our March forecasts for growth and revised them down for inflation.
But we find ourselves yet again in a different world, whose contours are not yet clear. We are facing profound uncertainty about the path of the economy.
None of us can resolve the uncertainty about how the war in Iran will play out. But what I can do is set out how we will approach this shock.
The main message I want to convey is that our response will be rooted in our monetary policy strategy, which is well equipped to help us navigate it.
Our strategy sets out three principles that will guide us.
First, it requires us to assess the nature, size and persistence of the shock before taking decisions on policy.
Monetary policy cannot bring down energy prices. But we must identify when higher energy costs risk spilling over into broad-based inflation – be it through indirect effects or through second-round effects via wages and inflation expectations.
Second, it requires us to focus on risks, not only the baseline.
Because the effects of significant price shocks on inflation can be non-linear, we need to work with scenarios and pay close attention to early warning signs that the shock is embedding in broader inflation dynamics.
Third, it gives us a graduated set of options for how to respond, which depend on the intensity and duration of the shock and how it propagates.
Small, one-off and short-lived supply shocks can be looked through. But as expected deviations from our inflation target grow larger and more persistent, the case for action becomes stronger.
Assessing the shock
Central banks have a long history of dealing with inflationary energy shocks, and over that time we have built up a substantial body of evidence about when they risk spilling over into generalised inflation.
In the euro area, the historical evidence suggests that the risk of broad pass-through from energy prices is the exception rather than the rule. When shocks are small in magnitude and short in duration – as has most often been the case – their inflationary impact tends to largely stay within the energy component itself.[1]
But two factors can change that picture.
The first is the intensity and duration of the shock.
ECB research shows that the relationship between energy price shocks and inflation can be non-linear: while small increases trigger no significant reaction in prices, larger shocks have disproportionately stronger effects.[2]
The second is the propagation of the shock, which depends on the macroeconomic environment in which it lands.
Firms are more likely to be able to raise prices when demand is stronger, workers are more likely to be able to bargain for higher wages when labour markets are tighter, and both are more likely when inflation is already high.
ECB research confirms that pass-through is measurably stronger when capacity utilisation is high and unemployment is low[3] – and that wages feed into prices more forcefully when inflation is already elevated.[4]
How people have experienced inflation in the recent past also matters. Research shows that lived experiences of inflation can have lasting effects on how people form expectations, with recent salient episodes carrying disproportionate weight.[5]
When the energy shock hit in 2021–22, several of these channels were operating simultaneously. But there are factors today which point to a lesser pass through.
First, the initial shock has so far still been smaller.
In 2022, the shock was exceptionally large and persistent. Even before the Russian invasion began, oil prices had increased threefold between October 2020 and March 2022 – and natural gas prices by even more as Russia gradually throttled supplies.
Thereafter, Europe was effectively cut off from a supplier that had provided around 45% of its natural gas imports and forced to find new suppliers, compete in the global LNG market and build new import infrastructure.
Oil prices peaked at around $130 per barrel in March 2022, a comparable level to today. But gas prices surged to much higher levels than we have seen so far: €340 per megawatt hour in August 2022 versus around €60 today.
Second, the macroeconomic backdrop today is more benign.
In 2022, the economy was primed for pass-through. Europe was experiencing strong pent-up demand after the post-pandemic reopening. Supply chains were still disrupted after the pandemic. There were significant labour shortages. Headline inflation at the onset of the shock stood at more than 5%.
ECB analysis confirms that this combination of factors exacerbated the inflationary effects.[6] In particular, in the absence of demand pressures, the impact of supply-side shocks on inflation would have been considerably lower.
Today, the euro area economy is in a moderate recovery, without the pronounced demand-supply imbalances that characterised 2022. Headline inflation has been close to our target for almost a year. The unemployment rate is low by historical standards but we no longer face acute labour shortages.
Third, macroeconomic policies are less supportive.
When the invasion began in 2022, monetary policy was highly accommodative, with interest rates at -0.5% and the ECB still engaged in net asset purchases. The fiscal stance was also expansionary, with an aggregate deficit of over 5%.
Interest rates today are broadly at their neutral level and the fiscal stance is neutral, too, with an aggregate fiscal deficit of around 3%.
At the same time, there are reasons for vigilance.
The International Energy Agency has described this as the largest supply disruption in the history of the global oil market[7], and with the attacks on energy infrastructure – especially the Ras Laffan facility in Qatar last week – the likelihood of a quick normalisation is diminishing.
A further cliff edge is also approaching: global oil reserves are being drawn down, and the last LNG tankers that loaded in the Gulf before the war are now reaching their destinations, meaning the full impact of lost supply is only about to be felt.
And if the shock does intensify, the response of firms and workers may be faster than last time. We have a more recent memory of high inflation, which could affect how quickly costs are passed on and compensation is sought.
During the inflation surge, firms shifted to adjusting prices significantly more frequently: the share of consumer prices changing in any given month rose from around 8% to 12%.[8] As inflation came down, that frequency returned to near-normal levels. But the operational experience of rapid repricing remains.
On the worker side, the initial response was relatively slow: after a long period of price stability, it took time for employees to seek inflation compensation. But research shows that as inflation rose, people began paying more attention to price developments, particularly when inflation was far from target.[9]
Even though the 2022 shock was brought under control, that experience has left a mark. An entire generation has now lived through its first episode of high inflation – and it may not be as slow to react a second time.
Managing uncertainty
So we face a situation where, if the current shock remains contained in energy markets, it may have a limited effect on broader inflation. But if it intensifies or persists, the pass-through could accelerate.
How can we calibrate policy under this uncertainty?
There are two key elements.
The first is agility. We have followed for some time now a meeting-by-meeting, data-dependent approach without pre-committing to a particular rate path. This was precisely because we did not want to have our hands tied in an environment where the outlook could change rapidly.
In 2022 we were still bound by forward guidance on asset purchases and rates when the energy shock hit. That pre-commitment limited our flexibility to act. Now, we are prepared, if appropriate, to make changes to our policy at any meeting.
The second element is a focus on risks.
Last year, we updated our monetary policy strategy with precisely the type of challenge we face today in mind. We judged that we were moving into a world of more frequent supply shocks – we have faced at least four major ones since 2020 – and structurally higher uncertainty.
We decided that, in this environment, we needed to take into account not only the most likely path for inflation, but also the risks and uncertainty surrounding the baseline. This emphasis on risks was embedded in our reaction function in July 2025.
Given the range of possible outcomes we face today, scenarios are an especially valuable way to capture risks. They allow us to explore what could happen if key variables were to change – in particular, if the intensity, duration and propagation of the shock differ from our baseline assumptions.
ECB staff published two such scenarios last week. These are not forecasts: they are illustrations, constructed among other things under a no-policy-change assumption. And we will review and update our scenario analysis regularly.
The adverse scenario assumes that the shock intensifies but its duration is relatively short, containing its propagation through the economy.
Relative to the baseline, annual inflation moves almost one percentage point higher this year but falls back steeply by 2028, as indirect and second-round effects are outweighed by a large energy-related base effect. Growth would be somewhat lower in 2026 and 2027, before recovering in 2028.
The severe scenario assumes greater intensity, longer duration and broader, more persistent propagation.
Relative to the baseline, annual inflation would be significantly higher across the horizon – by almost three percentage points in 2027 – and would not return to target within the projection period.
Growth would be notably weaker in 2026 and 2027, by almost one percentage point cumulatively, before rebounding in 2028.
These scenarios highlight a crucial feature of the current environment: the non-linearity of the risks to inflation. As the shock grows in size and persistence, the response of prices and wages accelerates. The deviation from target widens disproportionately unless monetary policy steps in.
Because of these non-linearities, it is essential to identify as early as possible when the shock is at risk of broadening. That means tracking closely the indicators that can signal ahead of time the size and timing of indirect and second-round effects.
This will depend, naturally, on developments in commodity markets, because a sufficiently large shock will always spread beyond the energy component.
But it will also depend on how the burden of the shock is shared. As a net energy importer, a spike in energy prices creates a terms-of-trade tax for the euro area, which must be absorbed by some combination of workers, firms and governments.
If firms increase their selling prices disproportionately – as we saw in 2022 – it could trigger an equivalent response from workers, what I have called in the past tit-for-tat inflation.[10] We will therefore watch carefully firms’ selling price expectations and micro evidence on price changes, as well as paying close attention to wage trackers.
We will also monitor the demand side, as the risks to growth are on the downside. A negative supply shock weighs on demand, which can reduce the ability of firms to pass on costs and of workers to bargain for higher wages.
So far, consumer confidence has fallen more sharply in Europe than following the 9/11 attacks and the war in Kuwait in 1990, but not as steeply as following the Russian invasion of Ukraine. If households increase precautionary saving as they budget for higher energy bills, it could point to a more limited pass-through.
The fiscal response will matter. Targeted government policies can help smooth the shock by reducing energy demand and compensating lower-income households. But broad-based and open-ended measures may add excessively to demand and strengthen the pass-through.
On the appropriate policy response to supply shocks
Our strategy also helps us define how to set monetary policy appropriately.
Supply shocks are often presented as offering central banks a binary choice: either look through, or react when inflation expectations are at risk of being de-anchored. But in reality we can respond in a more graduated way.
In line with the medium-term orientation of our strategy, the appropriate response to a deviation of inflation from the target is context-specific and does not depend only on its origin – here, a supply shock – but also on its magnitude and persistence.
This points to three broad cases.
First, if the energy shock is seen to be limited in size and short-lived, the classical prescription of looking through should apply. Transmission lags mean that a monetary policy response would arrive too late and risk being counterproductive.
Second, if the shock gives rise to a large though not-too-persistent overshoot of our target, some measured adjustment of policy could be warranted. The optimal response to such a deviation is smaller when the cause is exogenous supply disruptions rather than strong demand, but it is not necessarily zero.[11]
Moreover, to leave such an overshoot entirely unaddressed could pose a communication risk: the public may find it difficult to understand a reaction function that does not react.
Third, if we expect inflation to deviate significantly and persistently from target, the response must be appropriately forceful or persistent. Otherwise, self-reinforcing mechanisms would kick in and the risk of de-anchoring would become acute.
Our updated strategy is explicit on this point: large, sustained deviations call for forceful monetary policy action, shifting to persistence as the tightening cycle matures, to prevent those deviations from becoming entrenched.
It is too early to say where on this spectrum we will need to be. Fortunately, we can assess the situation carefully, because we are entering this shock from a good starting point. The policy stance is broadly neutral, inflation has been on target for around a year and longer-term inflation expectations are well-anchored.
In the period ahead, incoming information will give us greater clarity on how the conflict is likely to evolve and how the economy is responding. We will monitor developments closely and set monetary policy as appropriate to deliver on our target.
Conclusion
Let me conclude.
Four years ago at this conference, as the energy shock from Russia’s invasion of Ukraine was unfolding, I borrowed a line from Bertrand Russell: that the challenge we face is learning “how to live without certainty, and yet without being paralysed by hesitation.”
Those words capture our challenge today just as precisely. But we are not in the same position as we were four years ago.
We have a strategy that is built for a world of higher uncertainty, with risks and scenarios at its core. We have a graduated set of options for responding. And we are starting from a better place should we need to act.
We will not act before we have sufficient information on the size and persistence of the shock and its propagation. But we will not be paralysed by hesitation: our commitment to delivering 2% inflation over the medium term is unconditional.
 
 
Compliments of the European Central Bank The post ECB | Navigating Energy Shocks: Risks and Policy Responses first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

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