Economists say tariffs will make it harder for the Fed to lower interest rates - unless the U.S. economy enters a recession
President Donald Trump took to Truth Social Wednesday to argue that tariffs and lower interest rates go "hand in hand," suggesting that new trade barriers could prompt the Federal Reserve to ease monetary policy.
"Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!!! Lets Rock and Roll, America!!!" Trump posted.
But economists say the relationship between tariffs and interest rates doesn't work the way Trump suggests. If anything, new tariffs could lead to higher inflation, forcing the Fed to keep rates higher for longer.
Trump's attempt to marry high tariffs and low interest rates will be "like trying to pair whitefish with a Malbec," according to Paul Ashworth, chief North America economist at Capital Economics.
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