Facilitated: Dr. Ed Seifried
It now appears that the Trump administration has completed a U-turn on its highly controversial tariff initiative. The market reaction to the almost daily tariff announcements were unmistakably negative. The markets suffered their worst declines in decades. As the tariffs were suspended or removed, the markets regained most of the lost ground. But, market chaos was not the only casualty of the tariff episode.
The tariffs created confusion and distress for US monetary policy. FOMC members complained that the so-called “large” tariff policy was likely to cause both higher inflation and higher unemployment. The Fed’s dual mandate which was established by congress in 1977 directs the Federal Reserve to ensure that inflation is low and stable and that monetary policy should promote maximum employment. Fed chairman Jerome Powell stated that faced with higher inflation and higher employment, any interest rate change would only help alleviate one of the economic issues while making the other one worse.
It now appears that the interest rate cuts that many expected throughout 2025 will be postponed. What will happen to US growth, inflation and the labor market due to all of the uncertainty is yet to be determined.
Join us as Dr Ed tries to explain what is likely to happen in the economy in 2025-26.