The Federal Reserve Is Concerned About The Trade War & Tariffs’ Effects On The Global Economy

Many officials, including those at the Federal Reserve and International Monetary Fund (IMF) issued separate warnings on Thursday.

The officials seem to be in agreement in their analysis, which states that global trade tensions and rising tariffs pose an increased risk to US expansion, as well as the global economy.

Recent developments in the trade relations between the United States and several countries have left officials in the financial sphere concerned. The month of May saw the White House add a new 25% tariff on Chinese imports into the US, as well as new tariffs on Mexican imports. The month marked a serious turning point in the trade war with China, as well as broader trade policy as conducted by the Trump administration. These protectionist trade policies have shaken the global economy, particularly in the last few months. The effects of these tariffs have yet to be fully felt in the US and elsewhere, but many goods are expected to become more expensive as the Summer ends. One negative effect that has already taken place is a sweeping hit to business confidence and investment, the effects of which are already being felt on the markets globally.

While there is always criticism and controversy in anything related to politics, the Federal Reserve (essentially the US central bank) and IMF are generally very cautious, reserved, and tactful in their warnings. While the possibility of lowering interest rates is always present, some top officials believe it isn’t the time for such a move. Dallas Federal Reserve Bank President Robert Kaplan has stated his belief that it’s “too soon” for the Federal Reserve to lower interest rates, as the Trump administration could still change course on short notice. At the same time, Federal Reserve Board Chair Jerome Powell’s warnings that interest rates could drop if necessary lifted the stock markets on Tuesday. While most of these factors are quite uncertain at the moment, officials at the Federal Reserve and IMF have now provided their input.

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5 years ago