Jerome Powell, the Chair of the US Federal Reserve, has expressed serious concerns about the economic impact of former President Donald Trump’s tariff decisions. He spoke about this during a recent event held by the Economic Club of Chicago.
Powell explained that the new tariffs announced under Trump’s policies are much bigger and more sudden than what economists expected. He called these changes “very fundamental” and said they could affect the US economy in a major way.
What Are Tariffs and Why Do They Matter?
Tariffs are taxes on imported goods. When a country increases tariffs, it often leads to higher prices for goods brought in from other countries. This can lead to inflation, which means the cost of everyday items may go up for regular people.
Powell warned that this kind of policy could lead to three serious problems at the same time:
- Slower economic growth
- Higher unemployment
- Rising inflation
He said the US might face a situation where it’s hard to grow the economy while also controlling inflation and keeping jobs safe — something that hasn’t happened in nearly 50 years.
The Fed’s Challenge: Balancing Growth and Inflation
The Federal Reserve, also known as the Fed, has a dual responsibility:
- To keep prices stable (control inflation)
- To support employment (keep job numbers healthy)
But Powell admitted that tariffs might make it difficult to meet both goals at the same time. He said, “We may find ourselves in a challenging situation where our goals are in conflict.”
Powell Defends the Fed’s Independence
Even though Trump has been vocal about what the Federal Reserve should do, Powell made it clear that the Fed does not take orders from politicians. He said, “Our independence is protected by law.” Powell also reassured the public that political pressure does not affect the decisions of the Fed.
How the Markets Reacted
After Powell’s comments, US stock markets dropped sharply:
- The Dow Jones fell by 700 points (1.7%)
- The S&P 500 dropped 2.5%
- The Nasdaq Composite, which includes many tech companies, sank by 3.5%
These drops show that investors are worried about the economy’s direction.
Concerns About Jobs and Prices
Powell also talked about the job market and inflation. He pointed out that unemployment may rise as the economy slows down. In March 2025, the unemployment rate increased to 4.2%, slightly up from 4.1% the month before, based on data from the Bureau of Labor Statistics.
On inflation, Powell said that people will likely end up paying higher prices due to the new tariffs. However, he also admitted it’s hard to predict exactly how much prices will rise.
He stressed that both rising job losses and inflation will negatively affect families, businesses, and entire communities.
Final Words: A Difficult Road Ahead
In his closing remarks, Powell said that tariffs work like a “negative supply shock,” meaning they reduce the supply of goods, which can push prices up while slowing the economy. This makes the job of the Federal Reserve even harder.
