Jason Furman, who served as Chairman of the Council of Economic Advisers under 44th President Barack Obama from 2013 to 2017, warned that U.S. tariffs have reached their highest levels in over a century and could prove more inflationary than initially anticipated, just as markets speculate about potential Federal Reserve interest rate decisions.
What Happened: “I don’t think people realize that in important respects tariffs are now higher & more inflationary than what was announced last Wednesday,” Furman, now a Harvard professor, wrote on X. “Since then we’ve gone from 54% to 125% on China, our 3rd largest trading partner.”
Furman noted these increases “outweigh delaying the increases on 70+ others.”
The comments come amid market volatility following President Donald Trump‘s implementation of sweeping tariffs, which briefly went into effect before he announced a 90-day reprieve for non-retaliating countries.
The pause triggered Wall Street’s strongest rally since 2008, with the S&P 500 tracked by SPDR S&P 500 SPY surging 9.52% and Nasdaq-100 tracked by Invesco QQQ Trust QQQ rocketing 12.2%.
While China now faces steeper 125% tariffs, the market remains concerned about inflation implications ahead of Thursday’s March Consumer Price Index report. Economists expect headline CPI to ease to 2.6% year-over-year, down from February’s 2.8%.
Why It Matters: CME FedWatch Tool shows an 83.0% chance the Fed will hold rates at 4.25–4.50% at its May 7 meeting, and a 17.0% chance of a cut to 4.00–4.25%.
Fed Chair Jerome Powell has signaled caution, emphasizing the need for “greater clarity” before adjusting monetary policy. “The tariffs are bigger than almost all forecasters expected,” Powell noted, warning they could raise inflation with “more persistent effects possible.”
Trump has publicly urged rate cuts on his Truth Social platform, citing lower inflation and stronger employment, but Goldman Sachs economist Jessica Rindels expects “a boost to monthly inflation from the escalation in tariff policy.”
Veteran strategist Ed Yardeni warned that the Fed may remain reluctant to cut rates even if tariffs cause economic slowdown, potentially keeping rates elevated longer than markets expect.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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