Federal Reserve Chair Jerome Powell has issued a stark warning about the economic consequences of former President Donald Trump’s proposed tariffs, stating that the measures are likely to increase inflation and slow U.S. economic growth.
Speaking at a recent business journalism event, Powell emphasized that the economic and inflationary effects of the tariffs appear to be “significantly larger than expected.”
Powell’s comments come after Trump announced a new round of 10% tariffs on all imported goods, alongside the possibility of steeper reciprocal measures targeting key trading partners.
While the former president has argued that the tariffs will bolster American manufacturing and reduce reliance on foreign imports, Powell cautioned that such trade policies could contribute to higher consumer prices and job market instability.
“Tariffs of this magnitude introduce inflationary pressures that the Federal Reserve must carefully monitor,” Powell stated. “We are navigating a highly uncertain economic outlook, and these measures have the potential to complicate our monetary policy decisions.”
Despite Trump’s repeated calls for the Fed to cut interest rates to counteract the impact of the tariffs, Powell signaled that the central bank will not take immediate action.
He noted that while inflation is expected to rise in response to increased import costs, the Fed is committed to ensuring that it does not evolve into a long-term problem.
Financial markets reacted negatively to Powell’s warning, with major stock indices experiencing sharp declines amid investor concerns over potential economic slowdown and global trade disruptions.
Analysts have pointed out that escalating trade tensions could further strain U.S. relations with its key economic partners, potentially triggering retaliatory measures that exacerbate economic instability.
As the debate over tariffs intensifies, the Federal Reserve is expected to closely monitor inflation trends and employment data before making any policy adjustments. Powell reiterated that the Fed’s priority remains maintaining economic stability, even in the face of shifting trade policies.
For now, the economic impact of Trump’s latest trade strategy remains uncertain, but Powell’s cautionary stance suggests that the road ahead may be more turbulent than anticipated.
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