Trump's customs policy will lead to inflation and slow down the growth of the US economy - Federal Reserve System (FRS)
Kyiv • UNN
Adriana Kugler stated that Trump's customs policy will lead to increased inflation and slower economic growth. Even an agreement with China will not remove the risks.
The head of the US Federal Reserve System, Adriana Kugler, stated that the customs policy of the Trump administration is likely to lead to higher inflation and negatively affect economic growth, even taking into account the recently reached agreement with China to suspend mutual tariff increases for 90 days. This is reported by Forbes, writes UNN.
Trade policy is evolving and is likely to continue to change, as was achieved in the context of negotiations with China. Nevertheless, it seems that it has already led to a significant economic impact, even if tariffs remain close to the levels announced so far.
Details
Kugler emphasized that the average customs rates in the United States are still much higher than they were for many decades before the decisions of US President Donald Trump.
If tariffs remain significantly higher compared to the beginning of the year, a pessimistic forecast is likely to be true for the US economy. The consequences will include increased inflation and a slowdown in the country's economic growth. Since inflation and employment are potentially moving in opposite directions in the future, I will closely monitor developments, considering the future path of regulation.
Kugler also stated that the temporary agreement between the US and China represents an "improvement", but tariffs between the two countries are "still quite high".
Last week, the Fed left the central bank's key interest rate unchanged for the third meeting in a row. Kugler stated that she supports this decision, given the risks of rising inflation, and also because she believes the Fed's position is somewhat restrictive for the US economy.
Let us recall
The US and China have agreed to temporarily reduce tariffs on each other's goods. This is done to ease trade tensions and allow time for dispute resolution.