Could Tariffs Spark Covid-Like Inflation? One Fed Official Is Wary | Global News Avenue

The Fed warned Wednesday that tariffs raised by President Donald Trump could damage supply chains and Stoke inflation, just as one official warned Wednesday of the economy suffering during the pandemic The price rises the same way.

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, spoke at an automotive industry seminar Wednesday afternoon. Goolsbee says Trump has extensive tariffs Threats to impose In Mexico and Canada, tariffs on China may flow in unexpected ways through the economy, which could withdraw the Fed’s efforts to reduce inflation to 2% annually.

Goolsbee’s speech highlighted uncertainty about Trump’s policy and how it affects the country’s economy. Economists predict that Trump has imposed a 25% tariff on Canada and Mexico, and his 10% tariff on Chinese products could push up consumer prices.

Goolsbee said he is considering these tariffs based on what happened during the pandemic. Supply disruptions in some key products have led to price increases and created a domino effect, which is a wide range of effects that surprised decision makers.

For example, he noted that the consequences of the temporary slowdown in the computer chip manufacturing industry far exceeded anyone’s expectations.

“Chip manufacturers suddenly became a huge bottleneck in producing new cars,” Goolsbee said. “New car inventory disappeared and automatic inflation soared. Then, the spill began.”

“No new cars mean a shortage of car rental companies, so prices there soared. Car rental companies are trying to keep existing cars for longer, so the supply of used cars is reduced, and used cars are soaring. Delivery and logistics companies rely on Car delivery and logistics companies start to raise prices and so on.

Inflation is as high as 9.1% per year, soaring in 2022, but disappearing since then, according to the Consumer Price Index. It’s almost here, but it’s not down to pre-pandemic levels. Inflation surged the economy, hurting household budgets and It may even anger voters In the November 2024 election, it is enough to eliminate Joe Biden’s Democratic Party.

Goolsbee’s views are in stark contrast to those of Boston Federal Reserve President Susan Collins. Maybe “see” Prices of tariffs rise. In theory, this growth might be one-time rather than inflationBy definition, this is a continuous acceleration of prices.

Lower interest rates in 2025?

Collins and Goolsbee are among the officials of the Fed’s policy committee and they must decide whether the Fed should lower its benchmark interest rate, thereby reducing the borrowing costs of various loans to boost the economy.

The Fed has kept its main Fed funding rate at a height of ten years for more than a year until September to stop borrowing, slow down the economy and reduce inflation.

But as inflation has remained stubbornly above 2% lately and Trump’s election has brought uncertainty to federal economic management, the Fed chose Keep rates stable in January. Financial markets are now trying to guess when tax rates will be cut.

If there are any signs of Goolsbee’s speech, it may depend on the size, scope and timing of the Trump tariffs.

“It is dangerous to bear supply chain issues,” he said.Compared with 2018Tariffs may apply to more countries or more commodities or at higher rates, in which case the impact may be greater and longer lasting. ”