US economic growth will be hit and prices will rise for consumers as a result of new tariffs on goods entering the country, the head of America’s central bank has stated.
Chair of the Federal Reserve, Jerome Powell said the import taxes recently announced by President Donald Trump were larger than the bank had expected, going beyond the higher end of its estimates.
His comments followed a period of turmoil on global stock markets as investors reacted to trade tariffs coming into force and the escalating trade war between the US and China.
Powell said surveys of households and businesses reported a “sharp decline” in their sentiment over the economic outlook, largely due to tariff concerns. Since returning to office, Trump has stoked a trade war by introducing a 10% tax on goods being imported to the US from the vast majority of countries.
He has escalated tariffs further with China by putting a 145% tax on Chinese goods, though there are some exemptions for smartphones. China has hit back with tariffs of 125% on US products. The White House said on Wednesday that when the new tariffs are added on to existing ones the levies on some Chinese goods could reach 245%.
“The level of the tariff increases announced so far is significantly larger than anticipated,” Powell said in his starkest warning on the effects of the new tariffs regime.
“The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”
The US president has said tariffs will boost US manufacturing and jobs, but stock markets have been spooked.
Powell said on Wednesday that impact of the Trump administration’s changes to trade as well as immigration, fiscal policy and regulation on the US economy remained “highly uncertain”.
But perhaps more concerning to the Trump administration than stocks and shares plunging in value was the rise in the number of investors dumping US government debt last week. – BBC
