European Central Bank President Christine Lagarde warned on Sunday that American consumers are “yet to feel the pain” from tariffs, stating that the full impact is only “a question of time” as corporations temporarily absorb the costs.
Consumers To Soon Feel Two-Thirds Of Tariffs’ Impact
Speaking on CBS‘s “Face the Nation,” Lagarde explained that the tariffs imposed by the Donald Trump administration have caused the cost of European goods to jump from 1.5% to 13%.
She said this 11-percentage-point hike is currently being split three ways: “one-third on the exporter… one-third of the U.S. importer and one-third of the consumer.”
The two-thirds currently absorbed by businesses, she said, “is based on a squeeze of their margins.” Lagarde questioned how long those companies could sustain the hit. “How long are they going to put up with a squeeze of the margin, to be seen,” she questioned. “And when they don’t, because it’s becoming too tight, then it will be on the consumer.”
Meanwhile, talking about the U.S. consumers, Ryan Detrick, the chief market strategist at Carson Research, shared a Goldman Sachs report on X, stating that “consumers are paying 37% of the tariffs, but it’ll eventually be 55%.”
US Dollar’s Safe Haven Status Is ‘Slightly Eroded’
The tariff warning came as Lagarde described the broader global economy as being in “transformation,” driven by both trade-war-related “tariffs” and “the impact of artificial intelligence.”
As part of this transformation, Lagarde noted she sees “signs that the attraction of the dollar is slightly eroded.” She pointed to the rise of cryptocurrencies and a more than 50% increase in the price of gold since the beginning of the year as “clear signs that the trust” in the dollar is “eroding a bit.”
Lagarde cautioned that while the U.S. remains in a dominant position, “volatility” and “uncertainty… fueled by the administration, is not helpful to the dollar.”
US, Europe Should ‘Join Forces’ Against China’s Rare Earth Leverage
Regarding the U.S.-China trade dispute, she dismissed recent hostile rhetoric as “typical of negotiating tactics” and “muscle-flexing,” asserting that both sides “will have to come to the table.”
She also urged the U.S. and Europe to “join forces” as a “purchasing force” to counter China’s “very, very strong trading position” on rare earth minerals.
US Dollar Slides Nearly 10% YTD, While Gold Dominates With Fresh Gains
As of the publication of this article, Gold Spot US Dollar rose 0.09% to hover around $4,253.75 per ounce. Its latest record high stood at $4,379.44, rising about 56.56% over the year.
Meanwhile, the U.S. Dollar Index spot was 0.05% higher at the 98.4850 level. It was down 9.25% on a year-to-date basis.
Futures Action: S&P 500, Nasdaq Advance
The S&P 500 index ended 0.53% higher at 6,664.01 on Friday, whereas the Nasdaq 100 index rose 0.65% to 24,817.95. On the other hand, Dow Jones advanced 0.52% to end at 46,190.61.
On Sunday night, the futures of the S&P 500, Dow Jones, and Nasdaq 100 indices were trading higher.
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Photo Courtesy: Alexandros Michailidis on Shutterstock.com
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
