Goolsbee Warns Tariffs Threaten Economic Stability

Chicago Fed President Austan Goolsbee voiced concerns about the growing anxiety among businesses regarding tariffs imposed by President Trump, suggesting that escalating trade tensions could lead to a return of the high inflation experienced in 2021-2022. He highlighted that if the tariff threats materialize and provoke retaliatory measures, the U.S. economy could face stagnating growth amidst rising prices. Goolsbee emphasized the need for the Federal Reserve to rely on 'hard data' in navigating potential stagflation, noting that there is no straightforward policy response to such conditions. He acknowledged the uncertain nature of the situation but remained hopeful that negotiations could lead to new trade agreements, alleviating some of the tariff burdens. The financial markets have reacted negatively, with global stocks plummeting following the tariff announcements, which may impact consumer and business spending and, consequently, the Fed's policy decisions. Goolsbee reiterated that the Fed's actions will depend on the evolving economic landscape, particularly growth and inflation trends.