Being a bully on trade won’t work longer term, Lagarde warns

There’s no longer-term advantage to being a bully on global commerce, according to European Central Bank President Christine Lagarde.

“Coercive trade policies are not a sustainable solution to today’s trade tensions,” she said Wednesday in a speech at the People’s Bank of China in Beijing.

Lagarde, who served as French trade minister early in her career, spoke just hours after the US and China agreed to a preliminary plan to ease tensions in cross-border commerce, which are near an all-time high — primarily due to President Donald Trump’s on-again-off-again tariffs.

“To the extent that protectionism addresses imbalances, it is not by resolving their root causes, but by eroding the foundations of global prosperity,” she said. “And with countries now deeply integrated through global supply chains — yet no longer as geopolitically aligned as in the past — this risk is greater than ever. Coercive trade policies are far more likely to provoke retaliation and lead to outcomes that are mutually damaging.”

While Lagarde’s speech didn’t name Trump specifically, the ECB president — who headed the International Monetary Fund during most of his first term — warned that his return to the White House may lead to tariffs for Europe and has recently said trade will be changed forever by the levies.

“If we are serious about preserving our prosperity, we must pursue cooperative solutions — even in the face of geopolitical differences,” she said. “And that means both surplus and deficit countries must take responsibility and play their part.”

The US-China trade negotiations in London over the past days showcased the growing role of export controls in modern trade warfare, where access to rare minerals or tiny microchips can give one economy a big edge over a rival. China controls much of the world’s supplies of raw materials used to make magnets and other inputs for advanced manufacturing like electric vehicles, lasers and mobile phones.

“Given national security considerations and the experience during the pandemic, a certain degree of de-risking is here to stay,” Lagarde said. “Few countries are willing to remain dependent on others for strategic industries.”

© 2025 Bloomberg

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