Fed Williams Says Tariffs Boost Inflation But Have Negative Growth Effect

Tariffs imposed by President Donald Trump on Chinese goods in the escalating trade war between the two countries will boost U.S. inflation and could dampen economic growth, a top Federal Reserve policymaker said on Tuesday.

The U.S. economy is now in “a very good place” with low unemployment and recovering business and consumer confidence, President of the Federal Reserve Bank of New York John Williams said.

“When I look at first-quarter data there are mixed messages there, but …in terms of retail sales, consumer spending, and other economic indicators and importantly employment growth, the economy has rebounded pretty solidly after a bit of a soft patch late last year and early this year,” he told Bloomberg TV.

U.S. tariffs already imposed on Chinese goods had increased prices slightly and slowed growth, said Williams, who is vice chairman of the Fed’s rate setting committee.

“As tariffs get larger, assuming that happens, the effects will be bigger, boosting inflation in the next year and probably having negative effects on growth,” Williams said after an event in Zurich.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza