In an interview that ended just a few minutes ago, Austan Goolsbee from the Fed expressed growing concern over the economic consequences of the new U.S. tariffs. He emphasized that tariffs on intermediate goods — that is, raw materials used in production — could seriously harm American industry and disrupt supply chains. Goolsbee noted that there is a real sense of unease that high inflation could return, especially as sentiment among consumers and businesses has sharply deteriorated. He warned that sentiment indicators are approaching crisis levels, which is alarming, even though the link between sentiment and actual spending appears to be weaker now than in the past.
Goolsbee pointed out that companies are hesitant to invest due to unclear and shifting rules in international trade and economic policy direction. The banker notes that the impact on investment is negative, but its scale is not yet known. He also added that there is significant divergence among companies on how much of the tariff cost can be passed on to consumers. In some cases, this may lead to financial difficulties or even bankruptcies among suppliers. He also admitted that the scale of the tariffs is significantly larger than was previously expected or modeled, which further complicates the situation. In conclusion, Goolsbee stated that although markets react quickly to new information, the Fed must maintain a long-term perspective in policy making, especially in the face of unpredictable supply shocks.
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile appMarket reaction to US-China escalation (update)
Indices returned to declines during the interview, following the U.S. announcement of additional retaliatory tariffs on China. The market situation is very concerning, and tariffs of this magnitude between the U.S. and China pose a serious threat to both economies. This level of tariffs is aimed at freezing trade rather than generating additional budget revenues, and under current conditions, it is a clear escalation of the conflict. In our view, the market still holds hope for a quick agreement, as in the long run, 104% tariffs would be devastating for American companies, and the reaction in the indices should be significantly more severe.
CFDs on the Chinese index CHN.cash completely erase the gains and deepen the declines. A similar situation is observed on the indices in the USA.
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
