Federal Reserve Officials Warn of Job Losses from Trump Tariffs
2min read Federal Reserve officials have expressed concerns over the potential economic impact of the Trump administration's tariff policies. Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, warned that the extreme uncertainty surrounding U.S. trade policy could lead to significant job losses. He emphasized the need to resolve trade disputes with major partners to alleviate the economic uncertainty clouding the U.S. economy.
During a Q&A session at the University of Minnesota, Kashkari stated that resolving trade disputes with key partners would reduce a significant amount of uncertainty. He expressed concern over the economic uncertainty caused by President Trump's tariff-driven policies, which could ultimately result in widespread job cuts. Although job cuts have not yet materialized, Kashkari is closely monitoring the situation. Some companies have already begun contingency planning for potential layoffs due to the ongoing uncertainty.
Kashkari believes that the most optimistic scenario for the U.S. economy this year would be the resolution of trade disputes with major partners. This would provide a much-needed remedy for the extreme uncertainty currently affecting businesses and individuals across the nation. He warned that if everyone feels anxious, it will indeed slow down the economy. Kashkari also discussed the relationship between the U.S. trade deficit and interest rates, noting that the persistent trade deficit has been driven by foreign investment, keeping interest rates low. However, if the U.S. shifts to a trade surplus, borrowing costs could rise, leading to a higher neutral interest rate.
In addition to his concerns about trade policy, Kashkari reiterated his negative stance on cryptocurrencies, stating that they are essentially useless in developed economies except as speculative tools. He described them as mere toys.
Meanwhile, Christopher Waller, a member of the Federal Reserve Board, also warned that the trade war initiated by President Trump could soon lead to an increase in the unemployment rate. He noted that the current employment situation is at risk due to retaliatory tariffs imposed by other countries on U.S. goods. Waller stated that if the tariffs remain at their current levels, they will not significantly impact the U.S. economy until July. However, if the Trump administration reinstates aggressive tariff levels, companies may start laying off workers, potentially leading to a significant increase in unemployment. In such a scenario, Waller would support lowering interest rates.
Waller emphasized that if the labor market deteriorates significantly, he expects more interest rate cuts to follow quickly. He also highlighted the impact of tariffs on the U.S. economy, noting that the current situation is already affecting employment and could lead to further job losses if not addressed. The uncertainty surrounding trade policy is a significant concern for businesses and individuals alike, and resolving these disputes is crucial for maintaining economic stability.
