President of the Chicago Federal Reserve, Austan Goolsbee, emphasized that trade policy uncertainties could negatively impact the U.S. economy, potentially leading to delays in Federal Reserve decision-making.
Impact of Trade on the Economy
Goolsbee explained that instability in trade policies poses a dual risk to both inflation and economic growth. He stressed that tariffs could escalate import costs, thereby driving prices upward and slowing production due to supply chain disruptions.
Stagflation Threat and Business Concerns
Goolsbee warned that tariff policies threaten to trigger both inflation and unemployment, amplifying the risk of stagflation. He noted that increasing production costs could affect consumers and lead to a fall in demand and possibly heighten unemployment.
Investment Decision Uncertainty
Feedback from the business community corroborates these worries. Goolsbee reported that companies, especially in the construction and manufacturing sectors, are deferring new projects due to uncertainties. A construction firm’s CEO noted, "Each new tariff announcement spells new uncertainty for us. We prefer to wait instead of investing."
Trade policy uncertainties pose challenges for U.S. economic policy. Experts are taking into account the impact of trade wars on the economy and conclude that clarity in trade conditions is necessary for successful economic recovery.
