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Trump’s Tariffs Bump Into Reality as Economic Strategy Wavers

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After weeks of bluster and escalation, President Trump blinked. Then he blinked again. And again.He backed off his threat to fire the Federal Reserve chairman. His Treasury secretary, acutely aware that the S&P 500 was down 10 percent since Mr. Trump was inaugurated, signaled he was looking for an offramp to avoid an intensifying trade war with China.And now Mr. Trump has acknowledged that the 145 percent tariffs on Chinese goods that he announced just two weeks ago are not sustainable. He was prompted in part by the warnings of senior executives from Target and Walmart and other large American retailers that consumers would see price surges and empty shelves for some imported goods within a few weeks.Mr. Trump’s encounter with reality amounted to a vivid case study in the political and economic costs of striking the hardest of hard lines. He entered this trade war imagining a simpler era in which imposing punishing tariffs would force companies around the world to build factories in the United States.He ends the month discovering that the world of modern supply chains is far more complex than he bargained for, and that it is far from clear his “beautiful” tariffs will have the effects he predicted.This is not, of course, the explanation of the events of the past few days that the White House is putting out. Mr. Trump’s aides insist that his maximalist demands have been an act of strategic brilliance, forcing 90 countries to line up to deal with the president. It may take months, they acknowledge, to see the concessions that will result. But bending the global trade system to American will, they say, takes time.“Have some patience and you will see,” the president’s press secretary, Karoline Leavitt, told reporters on Wednesday.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Trump Says Fed Chair Jerome Powell’s ‘Termination Cannot Come Fast Enough’

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    President Trump lashed out on Thursday at Jerome H. Powell, the chair of the Federal Reserve, saying, “Powell’s termination cannot come fast enough!”Mr. Trump’s ire followed remarks by Mr. Powell on Wednesday, when he warned in a speech that the president’s tariffs could create a “challenging scenario” for the central bank by putting its two main goals — stable inflation and a healthy labor market — in tension.Mr. Powell reiterated that the Fed could afford to be patient with its interest rate decisions until it had more clarity about Mr. Trump’s policies. The Fed chair’s emphasis on the need to ensure that a temporary rise in inflation from tariffs did not become a more persistent problem suggested that the bar for further rate cuts was high.The president has been pushing for Mr. Powell to cut rate since returning to the White House. On Thursday, he referred to expectations that the European Central Bank would lower borrowing costs, saying the Fed should do the same.“The ECB is expected to cut interest rates for the 7th time, and yet, ‘Too Late’ Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete ‘mess!’,” Mr. Trump wrote on his Truth Social platform. “Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS. Too Late should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now. Powell’s termination cannot come fast enough!”The Fed seeks to operate independent of political influence, something that Mr. Powell on Wednesday said was a “matter of law.” He also said the Fed’s independence was “very widely understood and supported in Washington and in Congress where it really matters.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • 138 Shares85 Views

    in Economy

    Powell Warns Trump Tariffs Could Trigger Higher Inflation and Slower Growth

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    Jerome H. Powell warned that President Trump’s tariffs could lead to a “challenging scenario” for the central bank.Jerome H. Powell, the chair of the Federal Reserve, stressed that the tariffs announced so far go well beyond what the Fed had expected even in its worst-case scenario.Haiyun Jiang for The New York TimesAs President Trump’s trade policy has started to take shape, officials at the Federal Reserve have been more vocal about how such sweeping tariffs will affect the economy.Jerome H. Powell, the chair of the central bank, recently warned that levies of the scope and scale Mr. Trump was pursuing would most likely lead to even higher inflation and slower growth than initially expected — the makings of what’s known as a stagflationary shock.Mr. Powell expanded on those remarks on Wednesday, stressing that the tariffs announced so far go well beyond what the Fed had expected even in its worst-case scenario. In a speech at the Economic Club of Chicago, he laid out in greater detail how the Fed would deal with a situation in which its goals for a healthy labor market as well as low and stable inflation clashed with each other.“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” Mr. Powell said. “If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.”In a moderated discussion after his speech, Mr. Powell said the Fed would have to make “what will no doubt be a very difficult judgment” about which of its goals to prioritize.Mr. Powell’s comment accelerated a sell-off in stocks, with the S&P 500 ending the day down more than 2 percent. U.S. government bonds rallied, while the dollar continued to weaken against a basket of major currencies.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Powell Warns Trump’s Tariffs Risk Stoking Even Higher Inflation and Slower Growth

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    Jerome H. Powell, the chair of the Federal Reserve, warned that President Trump’s tariffs risk stoking even higher inflation and slower growth than initially expected, as he struck a more downbeat tone about the outlook, despite the economy so far remaining in a “good place.”“While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected,” he said. “The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”Mr. Powell characterized the risks of that outcome, which he warned could include higher unemployment, as “elevated.”“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,” he said in a speech at a conference in Arlington, Va., on Friday.“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,” he said. Higher inflation stemming from tariffs could show up “in the coming quarters,” he said.Mr. Powell added that the Fed’s “obligation” was to ensure that a “one-time increase in the price level does not become an ongoing inflation problem.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    in Economy

    The Job Market Has Been Resilient. The Trade War Could Be Its Undoing.

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    For three years, the U.S. economy has been buffeted by rapid inflation, high interest rates and political instability at home and abroad. Yet it has proved surprisingly resilient, supported by the sturdy pillars of robust consumer spending, a rising stock market, and healthy balance sheets for households and businesses alike.But one by one, those pillars have begun to crack under the weight of tariffs and uncertainty. The all-out global trade war that President Trump declared on Wednesday could be enough to shatter what had arguably been the economy’s final source of support, the strong job market.“The strength of the consumer is coming down to the jobs market,” said Sarah House, an economist at Wells Fargo. “And it’s increasingly perilous.”The sweeping tariffs that Mr. Trump announced on Wednesday, and the duties that U.S. trading partners quickly imposed in retaliation, sent stock indexes around the world tumbling on Thursday. The effects won’t be limited to the financial markets: Economists say tariffs will raise prices for consumers and businesses, which will lead employers to pull back on hiring and, if the tariffs remain in place long enough, lay off workers.“If the economy isn’t growing as fast, or it isn’t growing at all, you don’t need as many workers,” Ms. House said.Economists will get their latest glimpse of the job situation on Friday, when the Bureau of Labor Statistics will release March figures on hiring and unemployment.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • 138 Shares114 Views

    in Economy

    As Trump Stokes Uncertainty, the Fed Asks Businesses Where It Hurts

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    The central bank’s outreach to companies has taken on new significance as the outlook for growth and inflation gets cloudier.Chris Bergen, who runs a commercial greenhouse business in northern Minnesota, finds himself “walking a tightrope” roughly two months into President Trump’s second term. Acute uncertainty about how the administration’s trade and immigration policies will unfold and affect the economy has made him much more cautious about any expansion plans.As one of the country’s biggest producers of bedding plants, perennials and other flowers, Bergen’s Greenhouses is exposed on many fronts.Every June, it trucks in more than six million pounds of peat moss from Manitoba. Suppliers have stopped quoting prices until they have more clarity on tariffs. The plastic flower pots that Mr. Bergen imports from China could also wind up costing more if tariffs remain in place, squeezing already “razor-thin margins,” he said. He is also worried about needing to find workers if Mr. Trump, as part of an immigration crackdown, ends a program that provides temporary visas to many of the company’s agricultural workers.“We’re not putting our foot on the brake, but we are taking our foot off the gas,” said Mr. Bergen, whose family has run the business for over a century.That caution is one of the biggest concerns for the Federal Reserve, which is facing an increasingly challenging economic moment with little precedent. The central bank is trying to get a better read on the economy as it debates when — or if — it can again lower interest rates with inflation still too high for its liking. Businesses are warning of both higher prices and slower growth, effects that have yet to show up entirely in the economic data. The 12 regional presidents at the central bank have always kept close tabs on businesses in their districts in order to understand how economic conditions are evolving. That local outreach has taken on new significance as the range of possible outcomes has widened drastically.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • 113 Shares138 Views

    in Economy

    Inflation Remained Sticky Ahead of Trump’s Escalating Trade War

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    The Federal Reserve’s preferred inflation measure showed underlying price pressures persisting in February.Americans hoping for some relief on inflation suffered a setback in February, as new data showed underlying price pressures intensifying even before the latest escalation in President Trump’s trade war.The Personal Consumption Expenditures price index, after stripping out volatile food and energy items, climbed 2.8 percent in February from a year earlier, outpacing January’s annual pace. On a monthly basis, these prices ticked up another 0.4 percent, higher than the monthly increase in January.Overall inflation came in at 2.5 percent, a level that sits well above the Federal Reserve’s 2 percent target and has been more or less in place since November.The latest data from the Commerce Department highlights the extent of the challenge the central bank is confronting. Its debate over what to do about interest rates has been complicated by a rapidly escalating trade war, one that has bred extreme uncertainty about the economic outlook.On Wednesday, Mr. Trump announced 25 percent tariffs on cars and car parts imported into the United States and has vowed to unveil another set of tariffs next week.With the scope and scale of the tariffs not yet clear, and a host of other policies pertaining to immigration, taxes and deregulation still being worked out, the Fed has opted to stand pat until it gets more clarity about what exactly Mr. Trump will enforce and how consumers and businesses will respond.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • 125 Shares139 Views

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    How Fed Rates Influence Mortgages, Credit Cards, Savings and More

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    The Federal Reserve is expected to keep its key rate steady on Wednesday, after a series of cuts that lowered rates by a full percentage point last year.That means consumers looking to borrow are likely to have to wait a bit longer for better deals on many loans, but savers will benefit from steadier yields on savings accounts.Economists don’t expect another rate cut for a while, as the central bank waits for more clarity on an increasingly uncertain outlook given President Trump’s policies on tariffs, immigration, widespread federal job cuts, among other things.The Fed’s benchmark rate is set at a range of 4.25 to 4.5 percent. In an effort to tamp down sky-high inflation, the central bank began lifting rates rapidly — from near zero to above 5 percent — between March 2022 and July 2023. Prices have cooled considerably since then, and the Fed pivoted to rate cuts, lowering rates in September, November and December.More recently,Mr. Trump’s inflation-stoking polices could prompt the Fed to delay more rate cuts. But at the same time, longer-term interest rates set by the markets have been drifting down, influencing a wide range of consumer and business borrowing costs.Here’s what to watch for in five areas of your financial life:Auto RatesCredit CardsMortgagesSavings Accounts and C.D.sStudent LoansWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More