“It is now clear that duties increases will be significantly larger than expected.”
US President Donald Trump’s duties are at risk of higher unemployment and will probably cause inflation and growth slowdown, US Federal Bank President Jerome Powell warned Friday.
The dramatic commercial measures of Trump announced earlier this week have strengthened Powell’s control and the way the Fed will react to the free fall in financial markets and concerns that a prolonged trade war will raise consumer prices and unemployment rates.
“It is now clear that duties increases will be significantly larger than expected,” Powell said at an event in Virginia.
“The same is likely to apply to the economic impacts, which will include higher inflation and slower growth,” he said, adding that it is “too early” to examine changes in US monetary policy.
Powell spoke a few minutes after Trump’s posting on social media, with which the US president urged him to directly reduce interest rates and accusing him of playing a policy in his role as head of the independent US Central Bank.
The largest of the expected duties announced on Wednesday are added to the previous duties by country, which means that China, for example, will now face a total of 54%.
Other top commercial partners will also see higher rates, with the European Union now facing 20% duties from April 9 and India facing 26% duties.
The Trump government has also targeted specific areas of the economy, recently imposing a 25% duty on cars that are not manufactured in the United States.
Mr Powell said on Friday that he expects that current uncertainty would be reduced in the coming months.
“In a year from now, uncertainty should be much lower,” he noted. “The real impact of policies should then be quite obvious and clear,” he added.
DBRS estimates
The duties announced by the US president, coupled with the previously announced duties, will lead to a slower growth and higher inflation in the US economy, warns Morningstar DBRS.
According to the Canadian credit rating, the new sweeping duties announced by the US president of the US trade partners “is a significant escalation of the US government’s conflict approach to trade”.
He also says that the Trump government plans to impose a universal duty of 10%, in addition to the “mutual” duties, next week.
As DBRS points out, continuing uncertainty about commercial policy will act as opposite wind for investment and will harm short -term growth prospects.
“The duty plan, if implemented, is sure to slow economic growth, raise prices for consumers and businesses, and reduce the wealth of households,” says Michael Heydt, a senior vice -president of the world’s credit ratings.
“In addition, many businesses will probably remain reluctant to commit to significant short -term investments, as the duties announcement is unlikely to subdue the uncertainty of politics,” he adds.
Source: KYPE