The European Central Bank said on Wednesday that as investors appear to be RelaxHow risky is the real risk of U.S. assets after trade tariffs.

In its latest financial stability review, the central bank discussed the recent surge in market volatility behind global trade tensions driven by U.S. tariff policy.

The market is sensitive to frequent updates of trade and expropriation by the United States and its trading partners. When U.S. President Donald Trump announced tariffs, stocks stumbled first and then rebounded, when he announced a temporary suspension of work.

"During turbulent times, the market operates - which can be seen as the ability to quickly trade financial assets without extraordinary transfer of prices - remains good in the euro zone financial markets." "Although there are some atypical changes, it is far from some traditional safe havens, such as the U.S. Treasury and the U.S. dollar."

Although this may be related to technical factors, it may also have broader triggers, the ECB said.

"These moves may also reflect perceptions of more fundamental regime changes, with investors appearing to reassess the risks of U.S. assets that could lead to greater changes in global capital flows," the ECB noted. "This could have profound implications for the global financial system."

ECB Vice President Luis de Guindos advised CNBC on Wednesday that there is a risk of market correction. He told CNBC's Annette Weisbach that two keys to consider at the moment are increased valuation and strong uncertainty.

"The market is very benign about this situation. They think, you know, growth will be low, but we are not going to go into recession, inflation will fall, and monetary policy will follow suit," De Guindos explained.

He said risks could still arise, and what could happen in the likes of trade and fiscal policy and U.S. government regulations are unclear.

"These elements cause volatility. I think volatility may be the consequence of these two elements..., valuation and uncertainty."

The central bank noted in its report that it had previously warned of “the vulnerability caused by overestimation, which are not supported by fundamentals,” he said. “The source of this risk has now been partially realized.”

The ECB said Trump's reciprocal tariffs were caused by this.

Uncertainties related to U.S. trade, fiscal and regulatory policies are now the "game name" for the entire financial market and the global economy, De Guindos said. The question, he suggested, is now what this uncertainty and what any ultimately means for policy action in Europe and financial stability in the eurozone.

In terms of inflation and economic growth, De Guindos reiterated that tariffs will be "harmful" to growth, and the impact on prices is less obvious.

In the short term, tariffs will increase the price of imported goods while reducing demand, which may offset higher costs.

The long-term meaning may look very different.

“(in the long run) if tariffs and trade distortions lead to splits, which will be detrimental to supply chains, which may increase the cost of the company. This may be inflationary.”

Earlier this week, the EU released its latest economic forecast, reducing its GDP in the EU and euro region to 1.1% and 0.9% in 2025. By comparison, the EU's previous growth rate was 1.5% and the euro zone's growth rate was 1.3%.

Meanwhile, title inflation will slow down to the ECB’s 2% target in 2026.