Analysis: Trump's Tariffs Trade Conflict Will Increase the Fed's Job Difficulty, Threatening Anti-Inflation Efforts

BlockBeats News, April 14th. The news of Trump's tariff hike raising U.S. consumer prices being a blow to the Fed's anti-inflation action is already bad news, but it may be even more likely to open the "Pandora's Box": Economists point out that expectations of businesses and workers regarding prices often tend to self-fulfill. "Ignoring expectations, talking about transience, pretending the problem does not exist, these practices are all undesirable." "The Fed's most important asset is its reputation, which is reflected in stable long-term inflation expectations,"

as stated by Boston Fed President Collins last Friday. She also warned that "the impact of tariffs may be more widespread than most people imagine." Prior to Trump's tariff announcement earlier this month, the Fed had lowered its growth expectations and raised its inflation forecasts. Since then, several officials have warned that inflation could reach 4% this year, giving policymakers a reason to pause interest rate cuts—even as concerns about economic slowdown intensify.

Trump's comprehensive tariffs may turn a one-time price shock into sustained inflationary pressure, threatening the Fed's 2% inflation target. The latest data shows that long-term inflation expectations have risen to a 30-year high, with consumers expecting a 6.7% rise in future prices, and 5-10 year expectations reaching 4.4%. U.S. households have not yet recovered from the post-pandemic price surge, and public trust in the Fed is being put to the test.