President Donald Trump directed significant threats towards his international trade partners, leading to turmoil in global markets. This comes as the Federal Reserve is set to release minutes from their last meeting soon.
What Triggered Market Turmoil?
On April 2, Trump made an unexpected announcement regarding an increase in tariffs, leading to market disruptions. In response, a three-month postponement of higher tariffs was enacted to mitigate market downturns, with various countries receiving notifications just ahead of this deadline.
How Are Countries Responding to New Tariffs?
So far, only Vietnam and the UK have formalized trade agreements with the US. China has shown cautious interest, requiring further discussions. Trump claims that the recent tariff notifications serve as actual agreements. The new tariffs, reminiscent of earlier ones announced in April, include a 50% tax on copper and up to 200% on pharmaceuticals.
What Does This Mean for Inflation?
While tariffs approaching 40% will not directly increase inflation by the same margin, surging import prices may indirectly pressure inflation upward. This reversal in trends worries the Federal Reserve, which is reflected in their decision to maintain interest rates. Trump, on the other hand, cited a study claiming tariffs have no impact on inflation and called for the Fed to cut rates.
Anticipation heightens around the Federal Reserve’s upcoming statements and new tariff notifications. Tomorrow is set to be a crucial day for the economy.
