The Lesson of Trump vs. Powell – WSJ

Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete mess! Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS, Mr. Trump wrote. Too Late should have lowered Interest Rates, like the ECB [European Central Bank], long ago, but he should certainly lower them now. Powell s termination cannot come fast enough!

Mr. Trump was reacting to Mr. Powell s remarks Wednesday that the President s tariffs complicate the Fed s job of maintaining stable prices with low unemployment. The level of the tariff increases announced so far is significantly larger than anticipated. The same is likely to be true of the economic effects, which will include higher inflation and slower growth, Mr. Powell told the Economic Club of Chicago.

The problem for Mr. Trump is that Mr. Powell spoke the truth. Tariffs are a tax, which means higher prices for tariffed goods. Mr. Trump has imposed a minimum tariff on the world of 10%, which is roughly four times the previous average U.S. tariff rate of 2.4%.

That will be at least a one-time increase in inflation for imported goods that will flow into the Labor Department s consumer-price data. The hard decision for the Fed is whether to look past that one-time increase and assume it won t become part of consumer inflation expectations.

But there s also mounting evidence that household and business uncertainty is mounting, which will weigh on the private investment Mr. Trump needs to spur growth. Consumer spending could ebb as falling stock prices cause the wealth effect underpinning consumer confidence to go into reverse. Many economists think a recession is on the horizon.

via www.wsj.com

I would much rather go to a MAGA party than a party of central bankers. The whole idea of a central bank is the ultimate piece of Progressive domination of government, which they can’t carry off. But none of this makes tariffs a good idea.