‘Weaker growth, more job losses,’ Jerome Powell warns Trump’s tariffs inflict lasting economic damage, stocks tumble

US President Donald Trump's policy changes, including on tariffs, have not been witnessed in modern history, and they are impacting the actions of the Federal Reserve, Chair Jerome Powell said Wednesday.

“These are very fundamental policy changes. There isn’t a modern experience of how to think about this,” Powell said at an event by the Economic Club of Chicago.

“The level of the tariff increases announced so far is significantly larger than anticipated,” Powell said. This will push the economy towards weaker growth, higher unemployment, and inflation together, a challenge that the Federal Reserve did not have to tackle in nearly half a century.

“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” Powell said.

Powell on Fed's independence

“Our independence is a matter of law,” Powell said, indicating that President Trump's statements did not impact the central bank. He assured that the Fed's decisions will not be affected by political pressure.

“We’re never going to be influenced by any political pressure,” Powell said. “People can say whatever they want, that’s fine. That’s not a problem. But we will do what we do strictly without consideration of political or any other extraneous factors," he added.

How did US stocks react?

US stocks fell amid Powell's speech. The Dow tumbled 700 points or 1.7 per cent, the S&P 500 dropped 2.5 per cent, and the tech-heavy Nasdaq Composite fell 3.5 per cent.

Powell on inflation and unemployment 

Speaking on the impact of tariffs imposed by Trump, Powell said, “unemployment is likely to go up as the economy slows."

“In all likelihood,” there will be higher inflation, which will be the portion of the burden of tariffs “paid by the public," he added.

Powell assured that prices would increase due to tariffs. However, he remains uncertain about the extent of inflation.

He also acknowledged that high levels of unemployment or inflation will negatively impact communities, families, and businesses.

Earlier, New York Federal Reserve President John Williams mentioned that the tariffs may push inflation up to 3.5 per cent and four per cent this year, while the Personal Consumption Expenditures Price Index, an index used to measure inflation, stood at 2.8 per cent on a year-over-year basis in March. 

In March 2025, the unemployment rate in the United States stood at 4.2 per cent, according to the Bureau of Labor Statistics, a marginal increase from the previous month when the unemployment rate was 4.1 per cent.

Challenges for Fed

Powell highlighted how dealing with both unemployment and inflation will be a challenge for the Fed.

“A tariff is like a negative supply shock. That’s a stagflationary shock, which is to say it makes both sides of the Fed’s dual mandate worse at the same time,” Powell said.

“Prices are going up while jobs are being lost and growth is coming down, and there is not a generic playbook for how the central bank should respond to a stagflationary shock," he added.

Trump's tariffs

Donald Trump, on April 2, announced the imposition of a 10% baseline tariff on all imports, while separate rates were announced for certain trading partners. However, he declared a 90-day pause on tariffs for most countries, while imposing additional tariffs on China.

Trump on Fed rate cuts

Following the tariff announcement on April 2, Donald Trump urged the Fed to cut the key benchmark interest rates. He cited the low inflation and the higher job rates as the “perfect time” to increase the rates in the United States.

“This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates. He is always ‘late,’ but he could now change his image quickly. Energy prices are down, Interest Rates are down, Inflation is down, even Eggs are down 69%, and Jobs are UP, all within two months - A BIG WIN for America. CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!” said Trump in his post.