Chicago Fed President Austan Goolsbee stated in an interview on Tuesday that despite hard data indicating that the fundamentals of the US economy remain robust, the labor market is strong, and inflation rates have dropped significantly from their 2022 peak, the Trump administration's planned implementation of a new round of broad tariffs could trigger a rebound in inflation or a slowdown in economic growth.

If the impact of tariffs exceeds the range of imports accounting for 11% of GDP, it will trigger even bigger problems. "- Chicago Fed President Goolsby

Gulsby warned that tariffs may affect the economy in two ways: first, if taxes are imposed on components and production materials, manufacturing costs will rise across the board; Secondly, if market confidence is damaged, consumers reduce their spending, business investment slows down, and the economy may be in trouble.

Trump plans to implement unspecified "equivalent" tariffs on Wednesday, further escalating global trade tensions. This tariff policy will be combined with the previously announced 25% automobile import tariff (effective on April 3) and the steel and aluminum tariffs just implemented in March, intensifying market anxiety and increasing volatility on Wall Street.

Gulsby pointed out that the recent poor performance of "soft data" in the United States, including a significant decline in business and consumer confidence, indicates that the market has doubts about the economic outlook. For example, the latest manufacturing survey shows that the US manufacturing industry shrank in March, while factory product prices were rising, with many purchasing managers directly citing tariffs as the main cause of cost increases.

Faced with the uncertainty of slowing economic growth and the impact of tariffs, the Federal Reserve kept interest rates unchanged at 4.25% -4.50% at its March meeting. Chairman Powell and other officials have previously stated that considering the stable economic fundamentals, there is no urgent need for the Federal Reserve to cut interest rates.

The uncertainty in the market is on the rise, with a hint of fear. People do not want to return to the high inflation environment of 2021-2022. "- Goolsby

Editor's viewpoint:

Trump's "reciprocal" tariff measures may ultimately drag down the US economy by driving up business costs, disrupting supply chains, and affecting market confidence. In the short term, this policy may push up inflation and exacerbate market volatility, while the long-term impact depends on the reactions of businesses and consumers.

Until the policy direction becomes clear, the Federal Reserve may continue to remain cautious and adjust its interest rate policy cautiously. In the future, the market needs to closely monitor the final details of tariffs, changes in consumer and business confidence, and the Federal Reserve's response strategy.