Concerns about the economic impact of US President Donald Trump’s global tariffs held Wednesday, with federal president Jerome Powell warning that higher inflation has led to liquidity in stock markets.
Trump posted “Great Progress!” on social media in talks with Japan on a trade deal.
He is relying on his strategy, where tariffs are designed to lead to multiple personal agreements that will lower barriers to U.S. products and transfer global manufacturing to the U.S.
But these negotiations parallel confrontation with China, the top U.S. economic rival, and fear widespread damage.
Powell said tariffs are “very likely” to cause temporary price increases and could prompt “more lasting” hikes.
He also pointed out that during the “high uncertainty period”, the “volatility” in the market.
This volatility is visible on Wall Street, with the Nasdaq once a little drop of more than 4%, the S&P being more than 3%, and the Dow Jones Jones being more than two.
Leadership decline charges were a temporary drop of more than 10% as part of a quarrel over Trump against China, and amid restrictions on U.S. exports to semiconductors.
Ajay Banga, head of the World Bank, responded to Powell and told reporters: “Uncertainty and volatility are undoubtedly a contribution to a more cautious economic and business environment.”
– China says “no winner” –
Although tariffs have been approved at 10%, China faces taxes on many products up to 145%. Beijing accounts for 125% of its responsibility for U.S. goods.
“If the United States really wants to resolve the issue through dialogue and negotiation, it should stop exerting great pressure, stop threats and blackmail blockades, and talk to China on the basis of equality, respect and mutual benefit,” said Lin Ji'an, a spokesman for the Chinese Foreign Ministry.
Lin added: “There is no winner in a tariff war or a trade war, and China does not want to fight, but is not afraid of fighting.”
China said on Wednesday that its first-quarter forecast grew by 5.4% as exporters rush to bring goods out of goods before U.S. taxes.
But Heron Lim of Moody's analysis told AFP that the impact will be felt in the second quarter as tariffs begin to “hinder China's exports and will brake on slam investment.”
Ngozi Okonjo-iweala, head of the World Trade Organization, said the uncertainty brought by tariffs “threats to brake global growth and have a serious negative impact on the world, which is the most vulnerable economy.”
– Japanese test case? –
Before the Japan negotiations, Trump posted on his Truth Social Platform that he hoped “something that can be solved (it’s great for both Japan and the United States!”!”
Japan's special envoy said he was optimistic about the “win-win” outcome for the two countries.
South Korea, a major semiconductor and auto exporter in South Korea, said Treasury Secretary Choi Sang-Mok will meet with U.S. Treasury Secretary Scott Bessent next week.
“The current priority is to use negotiations … delay the imposition of reciprocity tariffs as much as possible and minimize uncertainty about the South Korean companies operating not only in the United States but in global markets,” Choi said.
But SPI Asset Management's Stephen Innes called the discussion with Japan “canary in tariff coal mines.”
“If Japan reaches a deal – even half the deal – sets the template. If they go out empty-handed, prepare yourself. Other countries will start pricing with confrontation rather than cooperation.”
The Daiwa Institute warned on Wednesday that Trump’s reciprocity tariffs could lead to a 1.8% drop in Japan’s real GDP by 2029.
Despite its popularity among Republicans, Trump’s tariff war is politically risky at home.
California Democratic Governor Gavin Newsom announced he was targeting Trump’s “power to issue tariffs unilaterally, these challenges have caused economic chaos, boosted prices, and harmed the state, households and businesses.”
Burs-SMS/DW
