When Donald Trump threatened to impose sweeping tariffs on many imports, he warned Europe that it would face consequences for its long-standing trade surplus with the US. Although the transatlantic spat has subsided in recent months, with the EU announcing its readiness to expedite trade negotiations following Trump’s extension of the tariff deadline to 9 July, the threat of renewed escalation remains very real.
In the face of an intensifying trade war with the US, Christine Lagarde, president of the European Central Bank (ECB), has responded to the threat of sweeping tariffs with a mix of caution, pragmatism, and strategic resolve. From the outset, she has consistently warned of the economic consequences of Trump’s policies and the need for a cohesive and unified European response.
In a notable speech at the Hertie School in Berlin, Lagarde called for the euro to be positioned as a global alternative to the US dollar. “The global economy has thrived on openness and multilateralism, supported by American leadership,” she said, warning that US support for a rules-based international order was wavering. “The continuation of this US-led economic order over the past 80 years has greatly benefited the European Union... but today it’s faltering,” she added, in a clear reference to rising global trade tensions amid Trump’s threat to impose sweeping tariffs on key partners.
While noting that a breakdown in global trade would damage all economies, she also suggested that the weakening of the dollar could “open the door for the euro to play a greater international role.” A stronger euro, she argued, could reduce borrowing costs for EU countries, protect the bloc from exchange rate volatility, and give Europe greater control over its own destiny. To achieve this, the EU would need a firm commitment to open trade, robust security capabilities, a stronger economy, and unwavering support for the rule of law. “This isn’t a favour that will be granted to us; we must earn it.”
Preparing Europe
Shortly after Trump’s election victory, Lagarde urged European leaders to “negotiate, not retaliate,” arguing in a Financial Times interview that a full-blown trade war would harm all parties and lead to a “global decline in GDP.” She advocated for cooperation and proposed that Europe increase its purchases of US-made goods to ease tensions, responding to Trump’s call for the EU to compensate for its trade surplus by buying more US oil and gas. She also kept the threat of retaliatory tariffs as a strategic option.
At the World Economic Forum in Davos earlier this year, she reiterated the need for Europe to remove internal trade barriers and reinforce its single market to resist external pressure, framing it as a proactive response to shifts in US trade policy.
Such a response is understandable given Lagarde’s previous warnings. She was an early critic of Trump’s tariffs, cautioning that they could backfire by raising inflation in the US and eventually impacting American consumers, fuelling inflation, and disrupting global trade. Her position remained consistent even during Trump’s first term, when she served as Managing Director of the International Monetary Fund (IMF).
Eurozone economy takes hit
Addressing EU lawmakers in Brussels in March, Lagarde explained that US tariffs on European goods could cut eurozone growth by about 0.3 percentage points in the first year. In the short term, she predicted that EU retaliation and a weaker euro—resulting from reduced US demand for European goods—would push inflation up by roughly half a percentage point.
Lagarde considers deeper trade integration with other countries a possible solution to any trade war, offsetting the negative impact of US measures. “The ECB’s analysis shows that closer integration with the rest of the world could compensate for the losses caused by unilateral tariffs, including retaliatory measures,” she said. Isolationist economies, she warned, would be the real losers.
Interestingly, Lagarde sees the potential implementation of US tariffs as the beginning of a European path to independence. In an interview with France Inter radio, she said of Trump’s policy: “He calls it ‘Liberation Day.’ I see it as a moment where we must collectively decide to take our destiny into our own hands.”
Ultimately, Lagarde’s response to the trade war combines calls for preparedness with a commitment to dialogue over confrontation. She views Trump’s tariffs as a dual challenge: a threat to global growth and an opportunity for Europe to rethink its economic strategy. Her position is not aimed at directly criticising Trump, but at placing Europe in a position to weather the storm and avoid mutual escalation.
Trailblazing achievements
Lagarde’s career has been defined by trailblazing achievements: she was the first woman to head a major international law firm, the first to serve as minister of finance in a G7 nation, the first to lead the IMF, and the first to head the ECB. No wonder she featured on Forbes’ list of the world’s most powerful women from 2011 to 2023.
Born in Paris in 1956 to academic parents, she earned her law degree from Paris Nanterre University, followed by a master’s in commercial law and a postgraduate diploma in labour law. After being twice rejected by France’s civil service, she pursued a master’s in economics and finance from Sciences Po Aix and earned a master’s in American literature from the Avignon College of Arts.
Lagarde holds honorary titles from the University of Montreal and Robinson College, Cambridge. A former member of France’s national synchronised swimming team, she speaks French, English, and Spanish. She has received the French Legion of Honour and various decorations from countries across the Middle East and Africa. In 2021, she was awarded the rank of Commander in the French National Order of Merit.
Between 1980 and 1982, Lagarde taught contract law at the University of Paris X before joining international law firm Baker McKenzie in 1981. She became a partner in 1987, specialising in commercial litigation, M&A, antitrust, labour law, and arbitration, and rose to the firm’s executive committee in 1995. In 1999, she became chair of the global executive committee in Chicago and was re-elected in 2002. She championed a “client-first” philosophy, leading to significant profit growth.
In 2005, she entered the French government as Minister of Foreign Trade, boosting foreign direct investment and opening new export markets, particularly in the tech sector. Two years later, she briefly served as minister of agriculture and fisheries before becoming France’s first female finance minister. She famously criticised France’s 35-hour work week as a “symbol of laziness” and called for stronger work ethics, a view echoed by the French business community.
From July to December 2008, she chaired the EU’s Economic and Financial Affairs Council, advancing global financial oversight and economic governance reforms. During France’s G20 presidency in 2011, she led its finance ministers and launched an ambitious agenda to reform the global monetary system.
First woman to lead the IMF
On 5 July 2011, Lagarde became the IMF’s 11th managing director and the first woman to hold the post. In February 2016, she was reappointed for a second five-year term. She became known for her policy-making skills and decisiveness, as well as her tough negotiating style and consistent support for global economic growth through free trade, social justice, and women’s empowerment.
She oversaw lending programmes to emerging economies such as Argentina, Egypt, and Ukraine and played a key role during the eurozone debt crisis—especially in Greece, where she advocated meaningful debt relief, which was an unpopular stance at the time. She argued that the IMF needed a $1tn lending capacity to handle future crises.
In December 2016, a French court found Lagarde guilty of “negligence” over her role in a 2008 arbitration decision favouring businessman Bernard Tapie. The decision had seen Tapie receive €404mn in a dispute with the formerly state-owned Crédit Lyonnais bank. She did not appeal the decision, maintained she had acted in good faith, and was not fined or sentenced. The IMF backed her fully. In May 2017, France’s Court of Cassation ordered Tapie to repay the funds in a final, non-appealable ruling.
On 2 July 2019, the European Council nominated Lagarde to succeed Mario Draghi as President of the European Central Bank (ECB), effective 1 November for an eight-year non-renewable term. The European Parliament confirmed her appointment by secret ballot in September, and she resigned from the IMF on 12 September to assume her new role.
