Fed Chair Jerome Powell Warns Tariffs Could Hurt U.S. Economy
Federal Reserve Chair Jerome Powell told Congress that if the United States continues to use tariffs for a long time, it could lead to higher prices and slow down the country's economic growth. He spoke about these concerns during a meeting with the House Financial Services Committee.
What Are Tariffs and Why Do They Matter?
Tariffs are taxes that one country puts on goods coming in from another country. The U.S. government has used tariffs, especially on products from China, to try to fix what it calls “unfair trade practices.” But Powell warned that using tariffs for a long time could backfire:
- Tariffs make imported goods more expensive. This means Americans may pay more for things they buy.
- Businesses also face higher costs. Many U.S. companies rely on parts from other countries, so tariffs can make it more expensive for them to make products.
- It could slow down economic growth. If prices keep rising and companies struggle, the whole economy could be affected.
Tariffs Already Impacting Prices and Businesses
Powell said that tariffs already in place, especially those on goods from China, have caused prices to go up for both American companies and shoppers. He explained:
“Sustained tariffs are likely to result in higher prices for consumers and businesses, and could ultimately slow the pace of economic growth.”
He also mentioned that many businesses are worried about what will happen next. Some companies have decided to wait before spending money on new equipment or hiring more workers because they are unsure about future trade rules.
- Higher input costs are making it more expensive for manufacturers to produce goods.
- Uncertainty about trade policies is causing businesses to delay important decisions.
Federal Reserve Is Watching the Situation Closely
Powell explained that the Federal Reserve, which sets interest rates and tries to keep the economy healthy, is paying close attention to how tariffs and trade tensions are affecting the country. He said the economy is still strong right now, with low unemployment and steady growth, but trade disputes could change that.
“We are seeing some effects of the tariffs in the form of higher input costs and uncertainty among businesses,” Powell told lawmakers. “Many companies have reported that they are delaying investment decisions due to concerns about future trade policy.”
Monetary Policy Can Only Do So Much
Some lawmakers asked Powell how the Federal Reserve plans to help the economy if tariffs cause more problems. Powell answered that the Fed will do what it can, such as changing interest rates to support growth, but he reminded everyone that the Fed cannot fix everything:
“While we have tools to support the economy, the ultimate resolution of trade disputes is beyond our control,” Powell said. “We encourage policymakers to find solutions that support continued growth and stability.”
Lawmakers Share Concerns from Their Districts
Several members of Congress agreed with Powell’s worries. They talked about how the tariffs are already hurting people in their home states. For example, Representative Cindy Axne from Iowa spoke about how farmers in her area are struggling:
“Farmers in my district are feeling the pain of these tariffs,” Rep. Axne said. “We need to find a way to resolve these disputes without harming American workers.”
- Tariffs have caused American farmers to lose business as other countries buy less U.S. products.
- Manufacturing workers are at risk if factories cut back due to rising costs.
Trade Dispute with China Continues
The United States and China are still fighting over trade rules. This fight has led to tariffs on hundreds of billions of dollars’ worth of goods. The Trump administration says these tariffs are needed to deal with unfair actions by China, but many people—including business leaders and lawmakers—are worried about the damage being done to American jobs and prices.
Critics warn that if the dispute continues, more American companies and families could face higher costs and fewer job opportunities.
The Fed’s Commitment to the U.S. Economy
Powell finished his remarks by saying the Federal Reserve will keep working to help the country. The Fed’s two main goals are to keep prices steady and make sure as many people have jobs as possible. Powell promised that the central bank will keep watching the economy and make changes to its policies if needed.
“We encourage policymakers to find solutions that support continued growth and stability,” Powell said, urging leaders to work together to solve trade disputes in a way that protects American workers and businesses.
Key Takeaways
- Continued tariffs could raise prices and slow down economic growth in the U.S.
- The Federal Reserve is monitoring the impact of these tariffs on businesses and workers.
- Many lawmakers are worried about the effects on farmers and manufacturers.
- Powell called for solutions that help the economy grow and protect American jobs.