Euro Zone Braces for Tariff Tensions With U.S.

Euro zone government bond yields rose slightly in less volatile trading, following wild swings. Traders weighed U.S. trade policy impacts, while the European Commission proposed a 'zero-for-zero' tariff deal. The ECB may delay monetary policy normalization due to expected inflation and trade tensions.

In a calmer market session following significant fluctuations, euro zone government bond yields have seen a slight increase. This volatility comes as traders evaluate U.S. trade policy impacts, hoping negotiations with Washington can prevent escalating disputes.

The European Commission proposed a 'zero-for-zero' tariff agreement after U.S. President Donald Trump announced a 20% tariff on the European Union. As a counteraction, the European Commission suggested retaliatory tariffs of 25% on U.S. imports, specifically targeting the metals sector and excluding broader levies.

ECB policymaker Yannis Stournaras highlighted concerns about potential delays in euro zone monetary policy normalization, mainly due to heightened expectations for inflation and a possible global trade war following U.S. tariffs. Furthermore, euro area market participants are closely monitoring reactions from other U.S. trading partners.

(With inputs from agencies.)