①Michael Barr, a member of the Federal Reserve, warned that the trade policies of the Trump administration could push up inflation, reduce economic growth, and increase unemployment, creating a dilemma for policymakers; ②Barr believes that tariffs could disrupt global supply chains, causing sustained upward pressure on inflation and potentially exacerbating supply chain chaos.
On May 9, financial news reported (Editor: Niu Zhanlin) that on Friday, local time, Michael Barr of the Federal Reserve stated that the trade policies of the Trump administration could continue to push inflation up, lower economic growth, and increase unemployment later this year, which may force policymakers to make a tricky decision on which issue to prioritize.
However, he added that the current interest rates are at an appropriate level before tariffs have a more clear impact on the economy.
Barr's latest remarks echoed those of Federal Reserve Chairman Powell, who stated at a press conference: "If the announced substantial tariff increases are sustained, it may lead to intensified inflation, slowed economic growth, and rising unemployment."
Regarding the impact of tariffs, Barr believes: "The scale and scope of the recent tariff increases are unprecedented, and we do not yet know their final form; it is too early to say how they will affect the economy."
But he noted that the risks are evident. "In my view, higher tariffs may disrupt global supply chains and create sustained upward pressure on inflation."
He also pointed out that companies need time to adjust their distribution networks. Some suppliers, especially small businesses, may not be able to adapt quickly enough and could go out of business, exacerbating supply chain chaos.
Barr said: "I am equally concerned that as the economy slows down, tariffs will lead to an increase in unemployment. Therefore, if we see both inflation and unemployment rising at the same time, the Federal Reserve may find itself in a dilemma."
Federal Reserve officials unanimously agreed this week to maintain interest rates, and Powell faced harsh criticism from Trump for not lowering rates, stating, "We do not feel the need to rush. We think it's appropriate to remain patient. As situations evolve — we obviously have a record of doing this — we can act quickly at the appropriate time."
Economists expect the impact of Trump's tariffs to take some time to materialize in the economy. Despite concerns over the tariffs leading to a significant drop in consumer confidence and a surge in imports, the job market has shown resilience thus far, adding 0.177 million non-farm jobs in April.
In response to questions after the speech, Barr emphasized that the Federal Reserve is not yet in a dire situation, but the outlook is concerning.
He stated that the condition of the USA economy is good, as past statistics show that inflation is still decreasing and the unemployment rate is stable. "Those Indicators that reflect future conditions are worrisome, and we can only wait and see."
Barr spent a lot of time during his speech examining how AI might influence the labor market. He mentioned that AI could bring "a tremendous improvement in living standards," but it would also pose "significant distribution changes and potential challenges" for workers.
In February of this year, Barr resigned from his position as Vice Chairman of Supervision at the Federal Reserve to avoid open conflict with Trump, who aimed to reduce regulation across various Industries. Barr was appointed by former President Biden and had pushed for stricter regulation of Banks during his tenure.
Editor/Rocky
