Bloomberg Surveillance
Single Best Idea with Tom Keene: Michael Darda & Elizabeth Economy
May 15, 2025
Dive into the intricate world of tariffs and their powerful influence on economic policy. Discover how these financial tools affect trade relations and market dynamics. The discussion also sheds light on monetary policy decisions by the Federal Reserve, particularly under Jerome Powell's leadership. Plus, explore the evolving U.S.-China trade relationship as China navigates new economic realities. It's a compelling look at how these factors shape our global economy.
05:10
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Quick takeaways
- The impact of tariffs on monetary policy can lower the neutral interest rate, risking a soft economic landing if the Fed is slow to adjust.
- China's 20 percent decline in exports to the U.S., paired with increased exports to Southeast Asia, highlights a strategic shift in its trade relationships.
Deep dives
Impact of Tariffs on Monetary Policy
The interplay between tariffs and monetary policy is significant, as disruptions from tariffs can lead to a lower neutral interest rate. If the Federal Reserve is slow to adjust its policy rate in response to these changes, a soft landing for the economy could be jeopardized. However, with recent reductions and moderation in tariff levels, the risks associated with this dynamic have diminished. Consequently, the Fed's current position appears stable, with the potential need for rate adjustments being considerably lower.
