Trump posted on the Truth platform calling on the Federal Reserve to cut interest rates. How do US tariffs affect the economy?

Trump posted on his social media platform, Truth Social, calling on the Federal Reserve to cut interest rates. He believes that as U.S. tariffs begin to gradually impact the economy, the situation would be much better if the Fed cuts rates, urging the Fed to "do the right thing." Trump has repeatedly called on the Fed to further cut interest rates, hoping to promote the U.S. economic growth agenda.

On March 19 local time, the Federal Reserve concluded its two-day monetary policy meeting and announced that it would maintain the target range for the federal funds rate between 4.25% and 4.50%. When Fed Chair Jerome Powell was asked at a press conference how much of the high inflation expectations were caused by U.S. tariff policies, he said "a large part," but it was "very difficult" to accurately assess.

Since Trump returned to the White House in January this year, he has quickly restored the protectionist policies of his previous term and frequently waved the tariff "big stick" at major trading partners. The U.S. government has introduced a series of tariff policies, such as imposing a 25% tariff on all imported steel and aluminum and a 25% tariff on products from Canada and Mexico. These unilateral measures violate the purpose of the World Trade Organization and have attracted trade countermeasures from various parties, intensifying international trade tensions.

Ian Begg, a professor at the London School of Economics and Political Science in the UK, warned that imposing high tariffs and waging trade wars would damage the global economy and could lead to an economic recession. U.S. tariff policies not only disrupt the operation rules of the global economy, create huge uncertainties, but also cause losses to the U.S. economy and its credit.

The United States uses tariffs as a bargaining chip, and its capricious actions have a negative impact on the global economy. For example, Trump first announced that the 25% tariff on Canada and Mexico would take effect on March 4, then announced on March 6 that measures would be adjusted to exempt imported goods that meet the preferential conditions of the United States-Mexico-Canada Agreement from tariffs. On March 11, he said that a 25% tariff would be imposed on steel and aluminum products imported from Canada, and a few hours later, he reversed the plan.

This policy uncertainty hinders business planning, disrupts international trade, and triggers fluctuations in the international financial market. The recent significant decline in the main U.S. stock indexes and exchange rate fluctuations reflect the concerns of global investors about the escalation of trade disputes and economic slowdown.

Although the U.S. government claims that tariffs are aimed at protecting domestic industries, many economists warn that its tariff policies will have a negative impact on the United States itself. The most direct impact is that U.S. consumers will face a sharp rise in prices. In the short to medium term, imported goods in the United States become more expensive, and the production of domestic substitutes cannot keep up in time, harming the interests of U.S. consumers.

U.S. local enterprises and foreign-funded enterprises in the United States may also face problems such as soaring production costs, supply chain disruptions, and frustrated business plans. The capricious policies of the Trump administration are also damaging the reputation of U.S. assets, leading to a decline in confidence and increased confusion.

Data from the Conference Board in the United States shows that the U.S. consumer confidence index in February was 98.3, significantly lower than 105.3 in January, the largest single-month decline since August 2021, and has been declining for three consecutive months.

Many Fed officials have previously warned that policy uncertainties in the U.S. trade and other fields are pushing up inflation risks. St. Louis Fed President Alberto Musalem said that the Fed may be forced to make a difficult choice between raising interest rates to combat inflation and cutting rates to cushion the economic downturn.

The latest data from the U.S. Department of Labor shows that the U.S. non-farm sector added 151,000 jobs in February, and the unemployment rate was 4.1%, both falling short of market expectations. Analysts believe that some enterprises have suspended recruitment due to tariff policies and an uncertain economic outlook.

In the market, the U.S. stock market and investor confidence have continued to decline recently. The S&P 500 index closed at its lowest level since November 4 last year on March 4. The weekly survey data of the American Association of Individual Investors shows that as of the week of March 5, the proportion of U.S. individual investors who are bearish on the stock market trend in the next six months was 57.1%, still at a historical high.

Michael Strain, an economist at the American Enterprise Institute, pointed out that the U.S. government's imposition of tariffs on major trading partners is equivalent to "taking money out of the pockets of Americans, making them unemployed, increasing the unemployment rate, and at the same time reducing the competitiveness of U.S. enterprises," which will ultimately hit the U.S. economy hard.

Now Trump is calling on the Fed to cut interest rates in an attempt to ease the impact of tariff policies on the economy. However, against the backdrop of persistent sticky inflation in the United States and the many uncertainties that tariff policies may bring, the Fed has been reluctant to commit to further loosening monetary policy. Shortly after the Fed's interest rate decision to hold steady this time, Trump couldn't wait to call for a rate cut. Whether the Fed will take action in the future and how U.S. tariff policies will evolve will continue to affect the economic trends of the United States and even the world.

Trump said that April 2 - the date when he is about to announce the plan to raise trade tariffs - will be the "liberation day" of the United States. Previously, he said in a joint session of Congress that reciprocal tariffs would begin to be imposed on April 2, and agricultural product tariffs would also take effect on the same day, claiming that other countries have been imposing tariffs on the United States for decades, and now it's the United States' turn to impose tariffs on other countries. U.S. Treasury Secretary Bessent recently revealed that the "tariff numbers" for the United States' trade restriction measures against various countries will officially take effect on April 2.

The implementation of this series of tariff policies will undoubtedly further exacerbate the complex situation faced by the U.S. economy. U.S. consumers will bear higher price pressures, and enterprises will face more difficulties in operation. If the rate cut measures called for by Trump cannot be implemented in a timely manner, the downward risk of the U.S. economy under the impact of tariffs may further increase. At the same time, the negative impact of U.S. tariff policies on the global economy is also continuing to ferment. The international trade order has been disrupted, the economic ties between countries have been impacted, and global economic growth faces more uncertainties.