Jerome Powell warns tariffs will raise inflation and hinder growth

In the United States, Federal Reserve Chairman Jerome Powell expressed significant concerns regarding the impact of President Donald Trump's new tariffs during his remarks at a conference held on March 29, 2025. Powell noted that the tariffs, which include a baseline 10 percent tax on all countries, are likely to lead to higher inflation rates and might also slow down economic growth. He emphasized that while there remains a level of uncertainty regarding the persistence of inflation, the immediate effects are expected to be substantial and could cause at least a temporary increase in inflation levels. Powell's caution came just two days after Trump announced the sweeping tariffs, which have already had notable repercussions on global markets, including sharp declines in stock prices in the U.S. and abroad. Alongside the baseline tariff, Trump specified additional taxes, such as a 54 percent tariff on China and 20 percent on imports from the European Union. The unpredictability of these tariffs and their economic implications has raised concerns about the potential for stagflation, a scenario characterized by rising prices coupled with stagnant economic growth. The Fed's dual mandate involves maintaining maximum employment while ensuring stable prices, a challenge that Powell acknowledged as uncertainty around tariff impacts grows. Recent labor statistics might have created an optimistic outlook, with 228,000 new jobs added in March, but the tariffs sowed doubt about future hiring and investment by businesses, reflecting a complicated economic environment for policymakers. Despite mounting pressure from Trump to cut interest rates, Powell maintained that the Federal Reserve must operate independently and non-politically. The central bank's decisions would hinge on how the economy reacts to the imprudent tariff policies, with the Fed facing the daunting task of navigating the potentially conflicting goals of stimulating growth while controlling inflation.