In America, concern about the economy is growing. For a long time, the country struggled with high inflation, although it seems under control for the time being, there is a new danger: intern. According to the Federal Reserve (FED), everything points out that Trump’s trade policy is at the basis of this problem.
Fed warns of “turbulent times”
During the press conference of chairman Jerome Powell it became clear that the central bank is increasingly concerned about the economic consequences of Trump’s trade policy. The Fed kept the interest stable between 4.25 and 4.50 percent. Powell, however, warned that Trumps input duties are greater than expected and possibly lead to inflation, slower growth and more unemployment.
These rates, announced in April, can further stir up inflation, delay economic growth and increase unemployment rates. The danger of stagflation, a situation in which high inflation is accompanied by a stagnant economy, is lurking.
Stagflation is not something that makes the central banks happy. It provides policy makers for a difficult choice between two evils. On the one hand, they can combat inflation with interest rate increases, but that can further slow economic growth and increase unemployment. On the other hand, they can stimulate growth, but that can push in inflation further. This makes effective economic recovery a huge challenge.
Trump is unpredictable
Whether Trump will change his course? That remains a big question mark. For the time being, China has to take care of the blows, while other countries rather received a temporary break of 90 days. But Trump remains unpredictable. There is also little clarity about a possible relaxation between the US and China.
According to Minister of Finance Scott Bessent, no negotiations have yet been started, despite previous statements by Trump. During a hearing on May 6, Bessent indicated that conversations are planned in Switzerland, but that concrete agreements are still missing. In the meantime, the towering rates of 145% remain in force on Chinese goods and 125% on American products.
Source: https://newsbit.nl/fed-slaat-alarm-trumps-handelspolitiek-duwt-vs-richting-stagflatie/
