The ongoing tensions over international trade are the biggest economic risk to the euro zone, the managing director of the International Monetary Fund said Thursday.
Though the euro area enjoyed an economic expansion "above potential" in 2017, "the momentum is slowing down a bit at the moment, Christine Lagarde, managing director of the IMF told reporters in Luxembourg, adding that it is likely the Fund will be "modestly" lowering its economic forecasts in July.
The Fund doesn't expect the economic slowdown to be "sharp," partly because monetary policy will continue to support growth in the 19-member region. But, according to Lagarde, there's a series of economic risks. The first of them is trade tensions.
"First on the list of risks is clearly the series of trade tensions that has been initiated by the tariff increase on steel and aluminium," Lagarde said, referring to the actions of U.S. President Donald Trump's administration.
Trump announced in March he would be putting a 25 percent tariff on steel imports and another of 10 percent on aluminium imports. Despite a temporary exemption, the European Union, and therefore the euro zone, became subject to those tariffs at the start of June.