Chicago, US:
As the ramifications of US President Donald Trump’s global trade war permeate various sectors, Fed Chair Jerome Powell warned on Wednesday (local time) of rising inflation, indicating that policy shifts under the Trump administration have placed the Federal Reserve in unprecedented territory.
In a speech delivered in Chicago, Powell remarked that the magnitude of tariff increases introduced by the Trump administration thus far is “considerably larger than expected” and the ongoing uncertainty surrounding the matter could lead to long-term economic repercussions.
“These represent very fundamental policy changes… There is no modern precedent for understanding this,” Powell stated.
The Federal Reserve is responsible for fostering full employment and controlling inflation, but Powell cautioned that Trump’s tariffs endanger both objectives. According to the most recent data, the US economy remains relatively stable.
Though Powell acknowledged an easing economic pace, he suggested that “inflation is likely to rise as tariffs take effect and some portion of those tariffs is ultimately borne by consumers.”
He also pointed out the “volatility” in the markets amid a “period of high uncertainty.”
Trump’s Trade War Strikes Stocks Again
This volatility was evident on Wall Street, where the Nasdaq at one stage fell by more than four percent, the S&P declined over three percent, and the Dow Jones dropped more than two percent.
Nvidia led the downward trend, briefly dropping over 10 percent after revealing significant costs attributed to new US export restrictions on semiconductors related to Trump’s conflict with China.
Trump Stays Optimistic
The US President, for his part, expressed optimism on social media, announcing “Big Progress!” in negotiations with Japan regarding a trade agreement.
He is relying on his strategy, where tariffs are designed to pave the way for individual agreements with multiple countries, to lower barriers for US products and redirect global manufacturing to the United States.
However, these negotiations occur alongside a worsening confrontation with China, the leading US economic competitor, prompting fears of widespread disruption.
China’s ‘No Winner’ Caution
While the rest of the globe faces a universal 10 percent tariff, China encounters levies reaching as high as 145 percent on numerous products. In retaliation, Beijing has imposed duties of 125 percent on US goods.
“If the US genuinely seeks to resolve the matter through dialogue and negotiation, it should cease exerting undue pressure, stop making threats and engage with China on the basis of equality, respect, and mutual benefit,” stated Lin Jian, spokesman for the Chinese Foreign Ministry.
“There are no winners in a tariff war or a trade war,” Lin added, emphasizing, “China does not wish to fight, but it is not afraid to do so.”
On Wednesday, China reported a surprising growth surge of 5.4 percent in the first quarter as exporters hastened to dispatch goods ahead of impending US tariffs.
