Trump’s Tariffs Have Put Powell In A Bind, Says Economist: ‘Get Rid of The Tariffs’ To Solve These Problems

According to economist Justin Wolfers, Federal Reserve Chair Jerome Powell is stuck in a policy dilemma created by the trade and tariff policies of President Donald Trump.

Monetary Policy Cannot Resolve Economic Strain

“The problem that Powell faces right now is a very difficult one,” Wolfers said in an MSNBC interview last week. “It is that tariffs have caused a slowdown in economic activity and rising unemployment. And we’ve got high-and-rising inflation.”

That combination of rising prices and falling growth leaves the Fed with conflicting policy signals, Wolfers said. “They tell you to do different things. When you get higher inflation, you raise rates. When [the] economy [is] slowing, you lower rates,” he said.

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Rather than relying on monetary policy to navigate these opposing forces, Wolfers was rather blunt in his policy recommendation, that is, to “get rid of the tariffs,” adding, “That’s what solves both of these problems.”

He said that the Fed is limited in its ability to resolve structural problems stemming from trade policy. “Monetary policy can’t solve the problem that Trump has created,” Wolfers said. “And so they’re trying to mop up the mess. But [the] fundamental problem is White House and the tariff program.”