Villeroy de Galhau: Transatlantic partnership crucial amid uncertainty
Banque de France Governor François Villeroy de Galhau emphasized the continued importance of the transatlantic partnership. Speaking at the Atlantic Council, he noted the global economy's unexpected resilience and the shared need for predictability amid ongoing uncertainty.
Global economy defies expectations
Despite rising trade barriers and geopolitical tensions, the world economy proved more resilient than feared a year ago, with global growth reaching 3.4 percent in 2025, surpassing the 2.8 percent forecast.
The euro area experienced 1.5 percent growth and 2.1 percent inflation in 2025, providing a strong starting position for 2026.
US growth, driven by an AI investment boom, dynamic equity markets (+16% on S&P500), and supportive fiscal policy, avoided a feared slowdown.
Trade impacts were also less severe, with world trade volumes rising by 5.1 percent in 2025, significantly above the 1.7 percent forecast.
However, the IMF's April 2026 WEO indicates that US trade policy reduced global GDP growth by 0.6 percentage points in 2025, with US consumers bearing about one-third of the burden from increased tariffs.
Shared risks demand coordinated action
The ongoing conflict in the Middle East adds upward pressure on inflation and downward pressure on global growth, with the IMF's April 2026 WEO revising global GDP growth down to 3.1 percent and inflation up to 4.4 percent for 2026.
This environment underscores the need for coordinated policy responses to common shocks.
Global imbalances are widening, with the US current account deficit at -0.9 percent, the euro area surplus at 0.2 percent, and China's surplus at 0.6 percent of global GDP in 2025.
These structural issues, along with financial stability concerns from private credit growth, sovereign debt, elevated AI-related valuations, and crypto-assets, bind economic interests together.
France, under its G7 presidency, aims to address these challenges in coordination with the US G20 presidency, focusing on reducing macroeconomic imbalances, enhancing economic security, and preserving financial stability against new vulnerabilities like cyber risk and extreme weather events.
Predictability and a stronger Europe
The US Supreme Court's recent decision on IEEPA tariffs, while affirming checks and balances, has reopened legal uncertainty and could disadvantage US allies.
This highlights the critical need for a return to more predictable trade policies.
Europe must respond by accelerating its own integration, investment in key areas like AI, energy, and defense, and fostering innovation.
This decisive moment demands a unified transatlantic resolve, as shared challenges mean a shared fate.