US Fed Issues Export Warning, Flags Rising Economic Risks Amid Trump’s Tariff War

 The US Federal Reserve on Wednesday left interest rates unchanged for the fourth consecutive meeting but made notable adjustments to its policy statement, reflecting rising concerns over the economic fallout from President Donald Trump’s escalating tariff measures.

While maintaining the benchmark rate at 4.25% to 4.5%, the Fed introduced fresh language addressing trade-driven volatility. “Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace,” the statement noted. This marked the first explicit reference to export conditions in the current cycle — a clear acknowledgment of the mounting pressure from the ongoing trade war.

Growth Holds Steady, But Tariff Tensions Cast a Shadow

The term “solid pace” has appeared in every Fed statement since January 2024 — including this latest one — despite GDP figures last week revealing the first economic contraction in three years. Importantly, the Fed also cautioned that “uncertainty about the economic outlook has increased further” and warned of “rising risks of higher unemployment and higher inflation,” signaling deepening worries about stagflation — the troubling combination of sluggish growth and persistent inflation.

In his remarks after the policy decision, Fed Chair Jerome Powell directly pointed to the drag caused by trade disputes. “Surveys of households and businesses… reported a sharp decline in sentiment and elevated uncertainty about the economic outlook, largely reflecting trade policy concerns,” Powell said. He further noted, “It remains to be seen how these developments might affect future spending and investment in the labor market.”