Federal Reserve Chair Says Trump’s Tariffs May Delay Inflation Progress

Federal Reserve Chair Jerome Powell said on March 19 that the Trump administration’s sweeping tariff expansions may stall progress on lowering inflation this year but that tariff-related price increases will be transitory as they work their way through the economy.

While longer-term inflation expectations are “mostly well-anchored,” Powell said business and household surveys are yielding increasing concerns about rising prices.

“I do think with the arrival of the tariff inflation, further progress may be delayed” in achieving the Fed’s 2 percent annual inflation rate, Powell said. Its quarterly summary of economic projections “doesn’t really show further downward progress on inflation this year, and that’s really due to the tariffs coming in.”

President Donald Trump vowed to impose tariffs on a number of products and nations while on the campaign trail last year. Since taking office, he has already imposed a 20 percent increase on Chinese import duties and goods and 25 percent tariffs on Canadian and Mexican goods that do not comply with the U.S.-Mexico-Canada Agreement.

The president accused the three nations of not doing enough to stem the flow of fentanyl into the United States and has said the tariffs are intended to address those potential impacts. Canada and Mexico have since taken steps to address border security and fentanyl trafficking with the United States.

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Trump also fully restored 25 percent tariffs on steel and aluminum imports worldwide and will impose reciprocal tariffs on April 2 to offset all trading partner countries’ import taxes and non-tariff barriers on U.S. products.

Multiple companies—including AutoZone—have said they would raise prices to offset tariffs on their imported goods.

The Trump administration has repeatedly said tariffs are an economic strategy to create long-term benefits by reducing trade deficits with other countries—which the president said are a result of their unfair trade practices—and bringing manufacturing capacities back to the United States.

The recent strong inflation readings throughout the last two months were unexpected, Powell said, and noted they could be from Americans buying ahead of the expected tariffs. While the Fed will attempt to trace those impacts, much “noise” surrounds various announcements that tariffs could be levied or delayed.

“Ultimately, though, it’s too soon to be seeing significant effects in economic data,” the Fed chair said about the tariff impacts.

Andrew Moran and Reuters contributed to this report.