Fed Officials Also Worry About Inflation from 'Trump Reciprocal Tariffs'

Concerns Over Simultaneous Rise in Inflation and Unemployment
Tariffs Expected to Be Passed on to Prices, Becoming an Inflationary Factor
Tariffs to Impact Labor Market as Well... Potential for Workforce Reductions

Concerns about inflation resulting from reciprocal tariff effects are being raised among Federal Reserve (Fed) officials.

Thomas Barkin, President of the Richmond Federal Reserve Bank, expressed worries that tariffs could raise both inflation and unemployment rates, posing a significant challenge to the Fed.

At a discussion held in New York on the 1st (local time), President Barkin said that the price shocks caused by tariffs could lead to a cage match between consumers who do not want to pay more and buy, and suppliers who believe tariffs must be passed on to consumers.

He added, "It will be very interesting to see where the outcome leads," noting that "some portion of the tariffs will definitely be passed on to prices, thus becoming an inflationary factor."

President Barkin also explained that some effects of tariffs will be felt in the labor market, stating that companies unable to raise prices will see reduced profits and soon begin efforts to improve efficiency, which means workforce reductions.

He emphasized that there is significant uncertainty about what policies will actually be implemented.

Austin Goolsby, President of the Chicago Federal Reserve Bank, also expressed concerns that tariffs could again trigger inflation or economic slowdown.

In an interview with Fox News, President Goolsby projected that since imports account for only 11% of the U.S. economy, the impact of tariffs on overall prices may be limited.

However, he said, "If tariffs are applied to parts or materials, raising production costs across a wide range of industries, or if people become fearful and start changing their behavior by stopping consumption or companies halt investment due to uncertainty, significant disruption will occur."

He pointed out that while hard data such as unemployment rates remain solid, soft data including surveys show signs of weakening as business and consumer sentiment cools.

According to a recent survey released by the Atlanta Fed, corporate financial officers expect tariffs to push up prices this year while hindering employment and growth.

About half of the companies participating in the survey imported goods from China, Canada, or Mexico, and "these companies were less optimistic and anticipated declines in sales and growth, as well as price and unit cost increases," the Atlanta Fed explained.