Agreement Reached to Reduce Tariffs by 115 Percentage Points Each in US-China Trade Talks
Tariff Uncertainty Impacts Economic Sentiment
Despite the agreement between the United States and China to significantly reduce tariffs imposed on each other, a Federal Reserve (Fed) official has assessed that tariffs will continue to drive up inflation and weigh on economic growth.
On May 12 (local time), Fed Governor Adriana Kugler stated at the International Economic Forum in Dublin, Ireland, "Trade policy is evolving, and even just this morning, it continues to change," adding, "Nevertheless, even if tariffs remain close to the currently announced levels, they are likely to have a significant economic impact."
The United States and China agreed to mutually reduce tariffs by 115 percentage points each during high-level trade talks held last weekend in Geneva, Switzerland.
Governor Kugler explained, "If tariffs remain significantly higher than at the beginning of this year, the economic impact will be similarly substantial," and added, "Uncertainty related to tariffs is already affecting the economy in terms of preemptive actions, sentiment, and expectations among economic agents."
Previously, Fed Chair Jerome Powell also warned at a press conference following the Federal Open Market Committee (FOMC) decision to hold interest rates on May 7, stating, "If tariff increases persist as announced, it is highly likely that this will lead to higher inflation, slower economic growth, and a rise in the unemployment rate."
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