—Federal Reserve Chairman Jerome Powell expressed uncertainty on Friday about the effects President Donald Trump’s reciprocal tariffs would have on the economy.
Trump announced reciprocal tariffs to address import duties and what he called “horrendous imbalances” in trade with foreign countries Wednesday during a Rose Garden event. Powell noted that the Trump administration was changing multiple areas of policy at an event held by the Society for Advancing Business Editing and Writing (SABEW) in Virginia.
“The new administration is in the process of implementing substantial policy changes in four distinct areas: Trade, immigration, fiscal policy and regulation,” Powell said during prepared remarks. “Our monetary policy stance is well positioned to deal with the risks and uncertainties we face as we gain a better understanding of the policy changes and their likely effects on the economy.”
“It is not our role to comment on those policies,” Powell continued. “Rather, we make an assessment of their likely effects, observe the behavior of the economy and set monetary policy in a way that best achieves our dual mandate goals.”
In an executive order signed Wednesday that imposed the tariffs, Trump cited multiple industries he wanted to see return to America, including pharmaceuticals, shipbuilding, automobiles and machine tools. Powell predicted a short-term increase in inflation due to the tariffs.
“While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent,” Powell said. “Avoiding that outcome would depend on keeping longer-term inflation expectations well anchored, on the size of the effects, and on how long it takes for them to pass through fully to prices.”