Fed’s Goolsbee Warns Trump Tariffs Could Fuel Inflation, Hurt Growth

Chicago Federal Reserve President Austan Goolsbee warned that President Donald Trump’s proposed trade tariffs could pose risks to U.S. inflation and economic growth. In a Fox News interview, Goolsbee acknowledged the economy remains strong based on “hard” data like inflation, growth, and labor markets. However, he highlighted growing concerns about potential economic fallout from new tariffs.

While Goolsbee noted that imports only make up 11% of the U.S. economy—limiting immediate inflationary pressure—he cautioned that retaliatory tariffs by global trading partners could escalate the situation. “The fear is if it jumps out of the 11% line,” he said, explaining that higher tariffs on intermediate goods could raise production costs and drive up consumer prices.

Goolsbee emphasized the psychological impact of economic uncertainty, warning that increased tariffs could lead to a pullback in consumer spending and business investment. “If the consumer stops spending, or if a business stops investing... that would be a bit of a mess,” he said.

Despite softening consumer and business sentiment, Goolsbee maintained that the U.S. economy’s fundamentals remain intact. Inflation has fallen below 3%, and the labor market continues to show strength. He suggested that if policy uncertainty subsides, economic resilience will likely continue.

Speculation is mounting ahead of Trump’s April 2 deadline, dubbed “liberation day,” when he is expected to announce new reciprocal tariffs on key industries and major trading partners. These potential measures are reigniting fears of a trade war and its broader impact on the economy.

Goolsbee’s comments reflect a cautious optimism tempered by concern over policy-driven disruptions, highlighting the delicate balance between strong economic indicators and fragile market sentiment.