Repeated tariff threats from U.S. President Donald Trump are hurting European economic confidence, according to European Central Bank (ECB) President Mario Draghi.
The euro zone's central bank held interest rates steady Wednesday, with Draghi warning that data analyzed by his team had confirmed "slower growth momentum" in the euro zone.
The European Union and United States are at loggerheads after Washington proposed a list of EU products it wanted to slap tariffs on to as retaliation for European aircraft subsidies. Trump tweeted on Tuesday that the EU had taken advantage of the U.S. on trade "for many years."
Directly referencing "the threat of tariffs from President Trump to Europeans," Draghi said Wednesday that the danger of protectionism was one of the potential factors dampening growth in the euro area.
"We have to see first of all what happens because you see in the past between words and deeds there is often a big gulf. But certainly the fact that these threats are being vented with some frequency is certainly undermining general confidence," said Draghi.
The ECB president added that general weakness elsewhere in the world could also be in part attributed to the "threat of further protectionist measures."
Draghi offered a gloomy perspective of the euro area's economic prospects noting that "incoming data remained weak," although he rejected the probability of a contraction, stating that the chances of recession remained low.
The euro dipped around 0.2% versus the dollar to sit at a session low of $1.1238 at around 2:30 p.m. London time.
While government bond yields dipped on the bearish tone, stock markets rallied as investors predicted that a cheap monetary policy from the central bank would remain firmly in place.
The Stoxx Europe 600 benchmark of Europe's bigger stocks rose to a session high as Draghi spoke.