Federal Reserve Chair Powell warns of economic uncertainty from Trump tariffs, markets drop 3%

Federal Reserve Chair Jerome Powell expressed concerns about the economic uncertainty stemming from President Donald Trump’s tariff policies. Speaking at the Economic Club of Chicago, Powell warned that the announced trade measures were larger than expected and could lead to higher inflation and weaker economic growth. This caution came amidst rising market uncertainty, with Powell stating that the policy outlook remains uncertain and that the Federal Reserve will adopt a “wait-and-see” approach before changing interest rates.

Powell’s remarks were his first public comments since the White House temporarily paused some reciprocal tariffs last week, excluding those on China. The pause in tariffs had initially prompted a market recovery, with stocks surging in response to the announcement. However, Powell’s comments suggested that the overall economic outlook remains uncertain due to the scale of the policy changes.

Markets reacted immediately following Powell’s statement near the end of the trading session. The Dow Jones Industrial Average dropped 690 points, or 1.7%. The S&P 500 fell 2.2%, while the Nasdaq Composite experienced the largest decline, closing 3% lower. Investor sentiment had already been under pressure following a disclosure by chipmaker Nvidia, which reported a $5.5 billion charge associated with new export restrictions to China imposed under the Trump administration. The announcement heightened market fears, compounding the effect of Powell’s caution on growth and inflation.

Contrasting the market jitters, new data from the U.S. Census Bureau showed a surprise jump in retail activity. March sales increased over 1.4%, marking the biggest monthly rise in over two years. Analysts partly attribute this surge to consumers buying ahead of anticipated higher prices from tariffs. This retail sales spike indicates that consumers are rushing purchases in anticipation of tariff-driven price hikes, reflecting a cautious optimism amidst the economic uncertainty.