Things might have calmed down, but the big tariffs on Chinese products are still keeping the average at about 25%.
Fed Warning on Economic Impact
U.S. CAPITAL: If President Trump’s high import taxes stay in place for too long, they could start to hurt the economy and lead to job losses, a senior Federal Reserve official warned. To help ease the damage, the Fed might have to cut interest rates more than they had planned.
In early April, Trump introduced a broad set of tariffs on goods from many of America’s trading partners. The aim was to address what U.S. officials consider unfair trade practices. The plan included a 10% tax on global imports, with even higher rates for certain countries, China being the primary target.
For now, the U.S. has suspended import taxes on all countries except China for 90 days. Without this temporary relief, the typical tariff on goods would have climbed to 25%.
Limited Relief from Tariffs
The short break hasn’t helped much, taxes on Chinese products remain so elevated that the typical rate still hovers around 25%.
While speaking in Missouri, Federal Reserve Governor Christopher Waller warned that if the current situation continues, the economy could slow down almost completely and many people could lose their jobs, based on the speech he had prepared.
Inflation might not last long, and it could go up to five percent soon. But Waller said the bigger concern is that it might hurt jobs and the overall economy for a longer time.
Recession Fears and Rate Cuts
He said that if the economy gets worse and there’s a real risk of a recession, he would support cutting interest rates sooner and by more than he first thought. He was talking about the Fed’s team that makes decisions on interest rates, called the FOMC.
According to him, if the economy keeps getting slower, a major slowdown would be a bigger problem than rising prices.
Since the start of the year, America’s central bank hasn’t made any changes to borrowing costs. They’ve stayed the same, between 4.25% and 4.5%.
For the time being, items like smartphones, laptops, and chip-making machines won’t face new taxes. The Trump team said on Friday that these products will avoid both the 10% global tariff and the much higher 125% tax on Chinese goods, for now.
Even though some taxes have been paused for now, many are still being used. That includes a 20% tax on things coming from China because of worries about fentanyl, and extra taxes on steel and aluminum brought into the country.
