Bloomberg Talks Fed Governor Christopher Waller Talks Tariffs and Labor Market
Apr 24, 2025
Christopher Waller, a Federal Reserve Governor, dives into the complexities of tariffs and their repercussions on the U.S. economy. He explains how the Trump administration’s tariff policies have sowed uncertainty, affecting business investments and potentially leading to layoffs. Waller also discusses the intricate relationship between tariffs, inflation, and labor market dynamics, emphasizing a measured approach to interest rate decisions while maintaining central bank independence in a politically charged environment.
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Tariffs Freeze Business Activity
- Tariffs create uncertainty that freezes business investment and spending decisions.
- Large tariffs could lead to layoffs and increased unemployment; smaller tariffs are partially absorbed by suppliers and consumers.
Tariffs Impact Prices and Jobs
- Inflation and unemployment could rise simultaneously as firms pass on tariff costs and cut labor.
- Layoffs may begin around the same time prices increase, reflecting the dual impact of tariffs.
Stay Calm on Tariff Inflation
- Do not overreact to inflation caused by tariffs; see it as a one-time price level effect.
- Monitor the labor market closely and be ready to cut rates if unemployment worsens significantly.