Powell Says ‘Significantly Larger Than Expected’ Trump Tariffs Are Bringing Uncertainty to Economy
‘As the new policies and their likely economic effects become clearer, we will have a better sense of their implications for the economy and monetary policy,’ he says.
The Federal Reserve chairman, Jerome Powell, warns that downside risks to the American economy and uncertainty have risen in the wake of President Trump’s tariffs because they are much larger than expected.
“I understand the uncertainty that is weighing on people,” Mr. Powell said at a business reporters event on Friday morning. Mr. Powell said the tariffs went beyond what anyone was predicting. “It is now becoming clear that tariff increases will be significantly larger than expected,” Mr. Powell said.
On Wednesday, Mr. Trump announced a 10 percent tariff on all imported goods as well as higher import taxes on goods from any country the White House deems to have trade practices that are unfair. Mr. Powell said it is too early to determine their impact.
“We are closely watching,” Mr. Powell said. “As the new policies and their likely economic effects become clearer, we will have a better sense of their implications for the economy and monetary policy.”
He warned that the tariffs are likely to raise inflation rates in coming quarters. That could make it tougher for the central bank to cut interest rates. Mr. Powell said there will likely bring slower growth in the months ahead but the Federal Reserve is in a holding pattern right now. “It is too soon to say what will be the appropriate path for monetary policy,” Mr. Powell said.
Mr. Powell did say that while growth is slowing, it is not shrinking and employment levels remain high. “We don’t need to be in a hurry,” Mr. Powell said.
He said he has been in contact with other central bankers across the world this week. “We’re talking about the implications,” Mr. Powell said.
The United States stock markets have plunged in the aftermath of Mr. Trump’s tariffs. The Dow dropped more than 1,000 points on Friday morning after Communist China announced it was slapping a 34 percent tariff on American goods.
Mr. Powell did answer one off-topic question. When a reporter asked why he always wears purple ties, he responded, “I like purple ties.”
Yet he also said it felt it would be “a little awkward” to wear blue or red ties due to their political ramifications.
