Fed Analyzes Impact of Trump's Trade Policies on Economy

The U.S. Federal Reserve has been actively analyzing the potential economic impact of the Trump administration's trade policies. Staffers have been working to decipher the effects on income, inflation, and state-by-state economic performance. This research reflects the significant role of trade policy in national economic discussions and Fed monetary policy considerations. Fed researchers are particularly focused on how import taxes influence prices. A May note indicated that tariffs on China had already increased goods prices by about 0.3% in early 2024. Larger tariffs have since been implemented, and even more substantial ones are being considered. Rising prices and their impact on consumer purchasing power are a concern for Fed officials. Studies show that tariffs, especially with retaliation from other countries, could lower inflation-adjusted income by 1% nationally. The Fed continues to monitor the situation, gathering data from surveys and business interactions to understand how firms may respond to rising tariffs.