President Donald Trump’s tough trade rhetoric has got the Federal Reserve talking.
Chairman Jerome Powell, picked by Trump to lead the U.S. central bank, said policy makers had not altered their economic outlook following the president’s announcement of trade tariffs on steel and aluminum and threats of measures against Chinese goods. But officials reported hearing worries from business leaders.
Later in his press conference, Powell said Fed officials reported hearing relatively new business-leader concerns about future trade actions and are seeing it as a “risk-to-the-outlook kind of thing.”
“The kind of things people are talking about would be more widespread retaliation and more widespread actions,” he said.
If he wasn’t alarmist about tariffs, Powell also wasn’t markedly optimistic about the supply-side benefits of fiscal policy. Asked whether tax cuts could bring sustained growth to the Trump administration’s 3 percent goal, he suggested that would be a heavy lift.
“That is well above almost all estimates, current estimates of potential long-run growth,” he said. “It would take significant increases in productivity and labor force participation to get there.”