Trump has said numerous countries are lining up to make deals with the United States
Chicago, US: As the ripple effects of US President Donald Trump’s global trade war are being felt across numerous industries, Fed Chair Jerome Powell on Wednesday (local time) warned of higher inflation, saying policy changes under the Trump administration have put the Federal Reserve in uncharted waters.
In a speech in Chicago, Powell noted that the level of the tariff increases announced by the Trump administration so far is “significantly larger than anticipated” and the lingering uncertainty around the issue could inflict lasting economic damage.
“These are very fundamental policy changes…There isn’t a modern experience of how to think about this,” Powell said.
The Fed is tasked to promote full employment and keep inflation in check, but Powell warned that Trump’s tariffs threaten both those goals. The US economy remains in decent shape, according to the latest data.
Powell noted a slowing economy, but he added that “inflation is likely to go up as tariffs find their way and some part of those tariffs come to be paid by the public.”
He also noted the “volatility” on the markets in a “time of high uncertainty.”
Trump’s Trade War Hits Stocks Again
That volatility was visible on Wall Street, where the Nasdaq at one point plummeted more than four per cent, the S&P more than three per cent and the Dow Jones more than two.
Leading the downward charge was Nvidia, which momentarily dropped more than 10 per cent after disclosing major costs due to new US export restrictions on semiconductors imposed as part of Trump’s tussle with China.
Trump Remains Upbeat
The US President, meanwhile, remained upbeat, posting on social media that there’d been “Big Progress!” in talks with Japan on a trade deal.
He is banking that his strategy, in which tariffs are meant to lead to multiple individual country agreements, will lower barriers to US products and shift global manufacturing to the United States.
But those negotiations are running parallel to a deepening confrontation with top US economic rival China — and concern over widespread disruption.
China’s ‘No Winner’ Warning
While the rest of the world has been slapped with a blanket 10 per cent tariff, China faces levies of up to 145 per cent on many products. Beijing has responded with duties of 125 per cent on US goods.
“If the US really wants to resolve the issue through dialogue and negotiation, it should stop exerting extreme pressure, stop threatening and blackmailing, and talk to China on the basis of equality, respect and mutual benefit,” Chinese Foreign Ministry spokesman Lin Jian said.
“There is no winner in a tariff war or a trade war,” Lin said, adding: “China does not want to fight, but it is not afraid to fight.”
China said on Wednesday that it saw a forecast-beating 5.4 per cent jump in growth in the first quarter as exporters rushed to get goods out of factory gates ahead of the US levies.
