Powell: uncertainty over tariffs may cause lasting damage

Fed Chairman Jerome Powell issues a stark warning about the possible consequences of Trump's tariffs on the US: "The level of tariff increases announced so far," he said during an event at the Economic Club of Chicago, according to CNN, "is significantly higher than expected," and the lingering uncertainty over tariffs could cause lasting economic damage. With Trump's tariffs setting the economy on a course for weaker growth, higher unemployment and faster inflation - all at the same time - the Fed is facing a situation that hasn't occurred in about half a century."

According to the Fed chairman, 'we may find ourselves in the difficult scenario where our dual mandate targets are in question', 'these are very radical policy changes', and 'there is no modern experience on how to deal with this'. The US stock markets fell significantly during Powell's speech: the Dow Jones was down 700 points or 1.7 per cent. The broader S&P 500 index was down 2.5 per cent. The Nasdaq Composite, the tech-heavy index, was down 3.5 per cent, reports CNN. 'The Fed's job is to promote full employment and keep inflation in check,' Powell said, 'but Trump's tariffs threaten both of those goals. For now, however, the US economy remains in good shape, according to the latest data."

Powell said that the best move for the Fed at the moment is to stay put until the data clearly show how the US economy is moving. "Jerome Powell just laid down the law to Trump," David Russell, global head of market strategy at TradeStation, a major US financial firm, told CNN. "It was a clear warning about stagflation and a statement that the Fed will not allow the White House to cut rates."

He is not the only voice raised against Trump's tariffs in these hours. The trade war triggered by the US president 'risks eroding the credibility of the United States', which is why, instead of closing the door, we need to engage in dialogue with our counterparts, including China. JpMorgan CEO Jamie Dimon said this in a lengthy video interview with the Financial Times, explaining that 'the US remains a haven' due to its prosperity, rule of law and economic and military strength, but America's economic pre-eminence 'could be threatened by the President's attempt to reshape global trade'.

According to the New York bank's number one, one of the most authoritative voices in the American financial world, 'uncertainty is putting a bit of a question mark over all of this. So it's going to be talked about relentlessly until, hopefully, these tariffs and these trade wars calm down and disappear, so that people can say: I can count on America'. Dimon also urged the US and China to engage with each other: 'I don't think there is a commitment right now. There is no need to wait a year, the dialogue could start tomorrow," he said, stressing that "we should be clear about what we are trying to achieve and I also think we should do that by talking to allies. I would like us to negotiate with Europe, with the UK, with Japan, Korea, Australia, the Philippines and have a very strong economic relationship'.