Top Line
Sweep tariffs rolled out by the Trump administration this week are expected to increase inflation and slow economic growth, according to Federal Reserve Chairman Jerome Powell.
WASHINGTON, DC-May 1: Federal Reserve Bank Chairman Jerome Powell announces interest rates will do so … more
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Important facts
Powell described the economic impact of the tariff as “a much greater than expected,” saying import taxes are likely to lead to an inflationary jump, at least temporarily, during his remarks in Arlington, Virginia.
After President Donald Trump’s tariff announcement, investors have been hoping to cut interest rates up to five to stimulate economic growth this year, but Powell hopes the central bank will change interest rates at around 4.3% in the near future.
Powell’s remarks came after Trump called on him to “stop playing politics” and called on a social media post Friday to lower target federal funding rates. Trump has asked the Fed for repeated fees despite the central bank’s political independence.
Trump’s tariffs could raise prices for imports, including cars, coffee and chocolate, but many retail brands relying on factories in South Asian countries are expected to be affected as well.
Core inflation was 2.8% annually in February, far exceeding the Fed’s 2% target.
Important Quotes
“Inflation will rise and growth will slow down,” Powell said. “However, at this point it is not clear what the right path for monetary policy is. We need to wait and see how this works before we begin any of these adjustments.”
Important background
World trade tensions escalated after the Trump administration imposed tariffs on more than 180 countries on Wednesday, with all three major US market indices falling at least 10% from record highs several months ago, driving the fear of a recession. Most countries have been hit by 10% tariffs on imports, but the rates are even higher for those who the Trumps deemed “the worst criminals.” For example, China was slapped at a 34% tariff on exports to the US (in addition to existing tariffs, it increased its actual charge to 54%). The country responded on Friday with a 34% retaliation tariff on all goods imported from the US.
This is a developing story and will be updated.
Future reading
Trump’s shares claim that it is “deliberately” crashing the stock market as it is lobbying to cut emergency fees (Forbe)
Here’s what costs after Trump’s tariffs, coffee, cars and perhaps a $2,300 iPhone (Forbes).
Stocks go further into tariffs – Nasdaq enters Bear Market, with Dow’s two-day losses reaching over 3,000 points (Forbe)
