Federal Reserve Chairman Powell Warns of Severe Economic Impact from Trump Tariffs

On April 4, Federal Reserve Chairman Jerome Powell expressed his surprise at the extent of tariffs imposed by U.S. President Donald Trump, stating that the scope and magnitude of these tariffs far exceeded the Federal Reserve's initial expectations. This revelation underscores the significant impact that these tariffs could have on the U.S. economy, potentially leading to higher inflation and slower economic growth.

Powell emphasized that the tariffs' impact on the economy could be more severe than previously anticipated. He noted that while the exact scale and duration of these effects remain uncertain, the potential for increased inflation and a deceleration in economic growth is a real concern. Previously, Powell had suggested that the inflationary effects of the tariffs might be temporary, but the latest developments indicate a more complex and enduring impact.

Powell also acknowledged the growing uncertainty surrounding U.S. trade policies, which has placed additional pressure on businesses. He did not explicitly state whether he believes the U.S. economy is heading towards a recession, but he did acknowledge the rising risk of an economic downturn as predicted by various analysts. The uncertainty surrounding trade policies has created a challenging environment for businesses, making it difficult for them to plan and invest with confidence.

Despite the challenges posed by the tariffs, Powell reiterated his commitment to completing his term as Federal Reserve Chairman, which is set to end in May 2026. His remarks highlight the delicate balance that the Federal Reserve must strike in responding to the economic fallout from Trump's trade policies. The central bank must navigate the complexities of a trade war while ensuring that monetary policy remains effective in promoting economic stability and growth.