Federal Reserve Chair Jerome Powell warned that the Trump administration’s new tariffs are likely to slow U.S. economic growth and push consumer prices higher, calling the scale of the import taxes “significantly larger than anticipated.”
Speaking Wednesday amid heightened market volatility, Powell said recent surveys show a “sharp decline” in business and consumer sentiment, largely due to rising trade tensions. The U.S. recently imposed a 10% tariff on imports from most countries and a steep 145% levy on goods from China, prompting a 125% retaliatory tariff from Beijing. When layered onto previous duties, some Chinese imports now face a total tariff of up to 245%.
“The economic effects are likely to include higher inflation and slower growth,” Powell said.
Stock markets reacted sharply. The Dow Jones fell 1.73%, the S&P 500 dropped 2.24%, and the Nasdaq closed down 3.07%. More concerning, however, was the spike in interest rates on U.S. government bonds—signaling eroding investor confidence. The rate jump reportedly influenced Trump’s decision to pause some of the new tariffs.
Despite the turbulence, Powell said the economy remains “in a solid position.” The Fed’s benchmark interest rate remains between 4.25% and 4.5%, and Powell indicated no immediate changes, citing uncertainty around trade, immigration, and fiscal policy.
The Fed now faces pressure from both inflation and the risk of rising unemployment. Powell noted that any future decisions would weigh how far the economy is from both goals: stable prices and full employment.
In a rare moment of levity, Powell closed his remarks quoting Ferris Bueller: “Life moves pretty fast.”
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