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Christine Lagarde was also asked about the impact that increased tariffs could have on economies in Europe, and this is of course referring to increased tariffs that could come if Trump ends up in the White House again come November. Here's what she had to say.

The issue of tariffs that you mentioned, um, that's an important aspect, an increase in in trade as a result of which export out of Europe to the rest of the world would matter. And this is this is an area where we will be attentive of course to whatever political decisions are made, uh, by whoever, uh, in the future.

Key word being by whoever in the future. And it's interesting, Sharon, I want to go to you on this because we're sort of hearing a little bit about policy that could come from both Biden and Trump that would lead to potentially some overcapacity in China if the US does institute any protectionist policies. Really talk to me about the extent to which that could potentially hinder growth in Europe and how that could impact the ECB moving forward.

Yeah, look, I think Europe is essentially a large open economy. It's a trading economy and especially Germany. Um, and we do think that if, uh, Trump, for example, came in, if the if there was a blanket 10% um tariff on imports going into the US, that would impact Europe quite severely by a number of routes. Um, I think probably the biggest one is just global trade itself would weaken a lot. There will be a lot of uncertainty around it. Um, you might also get more dumping, um, into Europe, uh, from China. As you say, if China's not looking to export so much to the US, they may be looking to do so to but Europe. On the one hand, of course, that could be a little bit disinflationary for Europe. Uh, but on the other, I think generally, with Europe being a big exporter, uh, very dependent on global trade, it would hit GDP. We reckon that 10% if tariff, it was globally applied, would take about a percent off of European GDP, so very significant.

Sharon, are you at all adjusting your recommendations yet or is this very much still a wait and see given the timing of this and where we are?

I think it is a wait and see still. We don't know the outcome of the election, obviously, and even if we did, we wouldn't know who and exactly what policy, um, would be implemented. Uh, but yes, we have taken a little bit of our sort of sector recommendations. We've shifted them a little bit more what we've called defensive, um, rather than than to cyclical. And that is also partly because there's been a bit of a weaker sort of soft spot for data globally as well. Um, so not just related to the election. But of course, there are those election risks. There is a risk around tariffs. Um, and you know, tariffs aren't just being applied or potentially applied by Trump. Um, Biden too, you've got the EU as well putting tariffs on some particular goods coming into Europe. That that sort of global trade uncertainty, uh, is is unhelpful.

Prison, I'm curious how you're looking at the protectionist strategies that we have seen and the potential for tariffs, what that fallout looks like, uh, for Europe and beyond.

Well, it's clearly weakening European growth perspectives and it is also probably pushing more inflationary pressure for Europe. So this again makes, um, Europe probably the weakest spot in the global economy. We're also seeing that that Europe is kind of choosing then to have its own protectionism that we will see more industrial policy coming to Europe, which means that we will see at least governments trying to support and to subsidize certain sectors in in Europe in order to at least keep some domestic growth momentum going in in Europe. But for now, given that Europe is so dependent on on on global trade, on China, on the US, um, it means that if we were to see more trade tensions coming, whether it's terrorists, whether it's other impediments, uh, we will see that Europe is probably the place that suffers the most.