Trump poses greater risk to EU financial stability, says Dutch central bank head

Donald Trump being elected as president of the United States of America could lead to new risks for the financial stability of Europe. Klaas Knot, the president of the Dutch Central Bank (DNB), said this on Thursday during an interview with students of the University of Amsterdam (UvA).

Knot is predicting more geopolitical risks over the coming years, which will lead to more mutual division. One of these risks is the result of the elections in the US. He claimed that you cannot predict yet how this is going to impact Europe.

He pointed out that Trump announced his plans for import tariffs for products from outside the US while he was still a presidential candidate. "That will entail a new series of risks, such as a negative impact on productivity growth," the DNB president says about that measure.

Productivity growth occurs when more is produced with the same amount of labor and resources. If the US imposes tariffs, European companies will have to pay more to export their products to the US.

Developing and implementing climate policies could also become more difficult, Knot thinks. “Combating climate change is a lot easier when there is less division.”

The DNB president is not the only person who is concerned about Trump’s policies. Luis de Guindos, vice president of the European Central Bank (ECB), has expressed his concern about the consequences that Trump’s plans for import tariffs will have. He believes that they could disturb the world trade.

François Villeroy, the president of the French central bank, fears that the import tariffs could lead to a trade conflict between the US and countries like China and the European Union. Knot is the Netherlands representative at the ECB.

Despite the risks that Knot mentioned, he is carefully optimistic about his expectations for the eurozone economy. He said they are “not as bad as some believe, but they are also not great.”

He added that real incomes are rising, and consumers have a lot of savings. “When you add this up together, a quick recovery should take place.” According to him, concerns such as politics and trade are likely to temporarily slow down consumption.

Knot also expects the Netherlands to be later than the rest of the eurozone with reaching the inflation target of two percent. The eurozone will reach this in 2025, but he believes the Netherlands will reach it in 2026 or 2027.