Powell Warns: Trump’s Tariffs Could Derail Fed’s 2025 Economic Targets

Jerome Powell drops a truth bomb—persistent Trump-era tariffs may kneecap the Fed’s progress this year. Who could’ve seen that coming?

Active verbs only: The Fed chair slams the brakes on optimism, signaling stalled inflation control if trade barriers remain. Markets brace for impact.

Closing jab: Another case of political legacy outlasting its welcome—like a bad blockchain fork nobody bothered to fix.

Powell says the Fed will wait before cutting rates

When asked whether the Fed is putting more weight on inflation or unemployment right now, Powell didn’t give a straight answer. “It’s too early to know that,” he said. He also said the Fed’s current position is “moderately restrictive,” and that there’s no need to rush. “We think we can be patient,” Powell added. “This leaves us in a good place to wait and see.”

But he also warned that if Trump’s tariffs stay in place, the Fed’s work could stall for at least a year. “We would not be making progress toward those goals — again, if that’s the way the tariffs shake out,” Powell said. 

He explained that the central bank’s twin mandates — stable prices and high employment — could both be affected. “The risks to higher inflation, higher unemployment have increased,” he said.

Powell was clear about the stakes. If these tariffs are left as is, it might delay the Fed’s timeline for rate adjustments well into 2026. 

That means Americans could be stuck with high borrowing costs longer than expected. The Fed is not confident that the economy can fully rebound with the current trade policy in place.

Powell warns tariffs could push inflation up and growth down

Powell also warned that Trump’s trade strategy could slam the brakes on the economy. “If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment,” Powell said.

The Fed chair explained that the inflation effects might be a one-time jump — but they could also last longer, depending on how the market reacts. “It is also possible that the inflationary effects could instead be more persistent,” he said.

Even with all that risk, Powell said the Fed still believes its current stance is strong enough to respond when needed. “We believe that the current stance of monetary policy leaves us well positioned to respond in a timely way to potential economic development,” Powell said.

The Fed chair’s comments came after a week of mixed economic signals. April payrolls showed some growth, but the latest GDP report showed weaker-than-expected numbers.

Powell said the Fed needs to see how Trump’s policy decisions play out before it can adjust rates again. The Fed won’t guess. They want proof — real data, not hypotheticals.

He also made it clear that there’s no playbook for what comes next. The tariffs could be lifted. They could expand. Or they could stay locked in for another year. And that’s exactly why the Fed is on hold. Powell said, “We don’t think we need to be in a hurry.” But if nothing changes in the White House’s trade stance, the central bank’s hands will stay tied.

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