Chicago, US:
As the wave impacts of US President Donald Trump’s global trade war are being felt in many industries, Fed Chair Jerome Powell warned of high inflation on Wednesday (local time), saying that policy changes under Trump Administration have put Federal Reserve in unwanted water.
In a speech in Chicago, Powell said that the level of tariffs declared by the Trump administration so far “is much larger than anticipated” and the uncertainty around the issue can increase permanent economic damage.
“These are very fundamental policy changes … There is not a modern experience of thinking about it,” Powell said.
The Fed has been tasked to promote complete employment and keep inflation under investigation, but Powell warned that Trump’s tariff threatened both those goals. According to the latest data, the US economy remains in a decent shape.
Powell mentioned a slow economy, but said “there is a possibility of going over inflation as tariffs find their way and some parts of those tariffs are paid by the public.”
He also noted “instability” on markets in “high uncertainty”.
Trump’s trade war hit shares again
The instability was visible on Wall Street, where Nasdaq at one point increased more than four percent, S&P more than three percent and Dow Jones more than two.
Leading the bottom charge was NVidia, which fell by more than 10 percent after disclosing major costs due to new US export sanctions on a semiconductor imposed as part of Trump’s quarrel with China.
Trump is excited
Meanwhile, the US President, remained excited, posted on social media that “there has been great progress!” In conversation with Japan on a business deal.
He is banking that his strategy, in which tariffs lead to many individual country agreements, will reduce obstacles for American products and transfer global manufacturing to the United States.
But those dialogue is going on parallel to an intensive confrontation with top American economic rival China – and concern over widespread disintegration.
China’s ‘No winning’ warning
While the rest of the world is slapped with blankets 10 percent tariffs, China has faced a levy of up to 145 percent on several products. Beijing has responded to 125 percent of duties on American goods.
Chinese Foreign Ministry spokesman Lynn Gian said, “If America really wants to resolve the issue through dialogue and conversation, it should stop excessive pressure, stop threatening and blackmail, and talk to China on the basis of equality, respect and mutual gains.”
“There is no winner in tariff war or business war,” Lynn said, “China doesn’t want to fight, but it is not afraid to fight.”
China said on Wednesday that it witnessed the forecast for an increase in the first quarter growth by 5.4 percent, as exporters raced to take out the goods out of the factory gate ahead of the US levy.