In a closely watched speech in Chicago, US Federal Reserve Chair Jerome Powell warned that President Donald Trump’s sweeping trade policies and escalating tariff measures have pushed the US economy into “uncharted waters,” with inflation expected to rise and long-term uncertainty looming large.

Powell highlighted that the scale of tariff hikes introduced by the Trump administration is “significantly larger than anticipated,” and the ongoing ambiguity surrounding trade relations could cause lasting harm to economic stability.

“These are very fundamental policy changes,” Powell remarked. “There isn’t a modern experience of how to think about this.”

While recent data shows the US economy remains relatively stable, Powell acknowledged a slowdown and emphasized that inflation could rise as tariffs trickle down to consumers. The Fed, responsible for maintaining full employment and price stability, now faces challenges on both fronts due to the tariffs.

Markets responded with sharp volatility—Wall Street saw the Nasdaq drop over 4%, the S&P 500 by more than 3%, and the Dow Jones by over 2%. Tech firm Nvidia led losses, plunging over 10% amid rising costs linked to new US export restrictions on semiconductors—a byproduct of tensions with China.

Despite the turmoil, President Trump expressed optimism on social media, citing “Big Progress!” in trade negotiations with Japan. His administration is pursuing individual trade deals, arguing they will reduce barriers and bring manufacturing back to the US.

However, this strategy coincides with deepening conflict with China, which faces tariffs of up to 145% on various exports. In response, Beijing imposed duties of up to 125% on US goods.

Chinese Foreign Ministry spokesman Lin Jian urged Washington to negotiate “on the basis of equality,” warning, “There is no winner in a tariff war. China does not want to fight, but it is not afraid to fight.”

In a closely watched speech in Chicago, US Federal Reserve Chair Jerome Powell warned that President Donald Trump’s sweeping trade policies and escalating tariff measures have pushed the US economy into “uncharted waters,” with inflation expected to rise and long-term uncertainty looming large.

Powell highlighted that the scale of tariff hikes introduced by the Trump administration is “significantly larger than anticipated,” and the ongoing ambiguity surrounding trade relations could cause lasting harm to economic stability.

“These are very fundamental policy changes,” Powell remarked. “There isn’t a modern experience of how to think about this.”

While recent data shows the US economy remains relatively stable, Powell acknowledged a slowdown and emphasized that inflation could rise as tariffs trickle down to consumers. The Fed, responsible for maintaining full employment and price stability, now faces challenges on both fronts due to the tariffs.

Markets responded with sharp volatility—Wall Street saw the Nasdaq drop over 4%, the S&P 500 by more than 3%, and the Dow Jones by over 2%. Tech firm Nvidia led losses, plunging over 10% amid rising costs linked to new US export restrictions on semiconductors—a byproduct of tensions with China.

Despite the turmoil, President Trump expressed optimism on social media, citing “Big Progress!” in trade negotiations with Japan. His administration is pursuing individual trade deals, arguing they will reduce barriers and bring manufacturing back to the US.

However, this strategy coincides with deepening conflict with China, which faces tariffs of up to 145% on various exports. In response, Beijing imposed duties of up to 125% on US goods.

Chinese Foreign Ministry spokesman Lin Jian urged Washington to negotiate “on the basis of equality,” warning, “There is no winner in a tariff war. China does not want to fight, but it is not afraid to fight.”