Federal Reserve Chair Jerome Powell said Wednesday that tariffs and trade policies enacted by President Donald Trump are likely to drive up both inflation and unemployment for the remainder of 2025. The remarks underscore the Fed’s growing concern that economic stability is at risk as new trade rules ripple through markets and households.
Powell expects inflation to rise as consumers absorb the costs of tariffs, while slower economic growth could lead to increased unemployment. He warned that these effects may persist throughout the year, driven by both current and anticipated policy shifts.
The Trump administration’s tariff includes 10% baseline duties on goods from most U.S. trading partners and 145% duties on imports from China. On April 9, the White House granted a 90-day tariff reprieve to several countries as negotiations began, though core tariffs remain in place.
Powell stressed that the economic uncertainty triggered by these changes has already affected business sentiment and consumer confidence. He also cautioned that the Fed could face a policy dilemma, as its dual mandate to promote full employment and price stability may become increasingly difficult to balance under current conditions.
Economic indicators suggest a marked slowdown in the first quarter of 2025. According to the United Nations Trade and Development, they project GDP growth will fall to 1% this year, down from 2.8% in 2024. JPMorgan Chase places the likelihood of a U.S. recession at 60%, citing trade tensions and global instability.
Despite broader concerns, consumer spending has held up modestly. Retail sales rose 1.4% in March, driven by early purchases of goods likely to be affected by tariffs, such as automobiles and electronics.
Powell acknowledged that many economists have revised growth estimates downward but have not yet forecast a full recession. Still, the Fed remains alert to the risks as shifting trade policies continue to reshape the economic outlook.
