Federal Reserve Chair Jerome Powell has issued a stark caution regarding the potential for Trump’s proposed tariffs to lead to stagflation, a challenging economic condition.
Jerome Powell reiterated a widely held view, seemingly unacknowledged by Trump, that reducing inflation becomes exceedingly difficult when substantial tariffs are implemented concurrently.
The Federal Reserve chair stated on Wednesday that sustained large tariff increases are “likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment.” He elaborated that while the inflationary impact might be temporary, “it is also possible that the inflationary effects could instead be more persistent.” Powell noted that preventing a more lasting inflationary effect would hinge on the magnitude of the tariffs, the time it takes for these costs to be fully absorbed into prices, and crucially, maintaining stable long-term inflation expectations.
This assessment is precisely the message Trump wishes to avoid publicizing. The former president has consistently criticized Powell for his candidness, labeling him “Mr. Too Late” and “a major loser,” and even suggested his dismissal after Powell accurately pointed out that aggressive tariffs contribute to inflation.
Although Powell did not explicitly use the term, his remarks pointed directly to “stagflation,” characterized by sluggish GDP growth, elevated inflation, and high unemployment. In light of these concerns about Trump’s economic proposals, the Federal Reserve decided against cutting interest rates on Wednesday.
Senator Elizabeth Warren commented on X, stating, “Donald Trump’s tariffs mean you could suffer higher prices and lose your job AT THE SAME TIME.” She added, “Forget dolls, families will be forced to make impossible choices between necessities like food, housing, and health care.”
The credibility of Trump’s trade war diminishes significantly when figures like Powell identify it as an additional financial burden on ordinary individuals already grappling with a high cost of living.