US Fed Chair Jerome Powell said that Donald Trump’s tariffs are unlike anything seen in modern history and have put the Federal Reserve in uncharted waters. At an event hosted by the Economic Club of Chicago, he said, “These are very fundamental policy changes. There isn’t a modern experience of how to think about this.”
He said that “the level of the tariff increases announced so far is significantly larger than anticipated” and could result in lasting economic damage. Owing to this, the Fed is also facing the challenge of managing the economy which is on a path of weaker growth, higher unemployment and faster inflation, he said.
“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” Jerome Powell said.
At present, the Fed’s best move is to wait for data showing how the US economy is responding to Donald Trump’s policies, he said.
So far, Donald Trump has imposed 25% tariffs on aluminum and steel; 25% tariffs on goods from Mexico and Canada, a 145% duty on Chinese imports, a 25% tariff on cars and a 10% baseline tariff on all US imports. The US President has also introduced temporary exemptions for some electronic goods.
Part Of Donald Trump’s Tariffs Will Be Paid ‘By Public’, Jerome Powell Says
While Donald Trump has repeatedly claimed foreign countries will pay tariffs levied on them, Jerome Powell said that is not the case. “Unemployment is likely to go up as the economy slows” and “in all likelihood” inflation is likely to go up as well, he said because of which a portion of the burden of tariffs is going to be “paid by the public.”
Prices will rise from tariffs, Jerome Powell said, adding, that if stagflation does become a reality, “we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.”
“We understand that elevated levels of unemployment or inflation can be damaging and painful for communities, families, and businesses,” he said.
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