Powell Warns Trump’s Tariff Strategy Poses Unprecedented Challenge for Fed

Federal Reserve Chair Jerome Powell has expressed deep concern over President Donald Trump’s sweeping tariff measures, stating that the scale and scope of the changes are without precedent in modern economic history. Speaking at an event hosted by the Economic Club of Chicago, Powell remarked, “These are very fundamental policy changes. There isn’t a modern experience of how to think about this.”

Powell emphasized that the magnitude of the tariff increases announced thus far has exceeded expectations and carries the risk of causing lasting economic damage. He cautioned that the Federal Reserve is now navigating a complex landscape marked by slowing economic growth, rising unemployment, and accelerating inflation.

To date, the Trump administration has implemented a series of aggressive trade tariffs, including a 25% duty on aluminum and steel, similar levies on imports from Mexico and Canada, a 145% tariff on Chinese goods, a 25% tariff on automobiles, and a general 10% baseline tariff on all U.S. imports. Certain electronic goods have received temporary exemptions.

Public Will Bear Part of the Tariff Burden, Powell Says

Contrary to President Trump’s assertion that foreign nations will shoulder the cost of these tariffs, Powell noted that the economic burden is already shifting toward domestic consumers and businesses. “Unemployment is likely to go up as the economy slows,” Powell said, adding that inflation is also expected to rise. “In all likelihood, a portion of the burden of tariffs is going to be paid by the public.”

He further warned that rising prices resulting from these trade policies could fuel stagflation—a troubling combination of stagnating growth and high inflation. Should such a scenario materialize, Powell affirmed the Fed would assess “how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.”

“We understand that elevated levels of unemployment or inflation can be damaging and painful for communities, families, and businesses,” Powell concluded, underscoring the central bank’s commitment to managing the evolving economic risks.