Bloomberg — Jim Tuchlera retailer from the Chicago area, and the president of the Federal Reserve, Jerome Powell, have a lot in common these days.
Tuchler states that the stir around tariffs has led him to a desperate situation, in which he can only guess what his import tax bill will be when the time comes. Its electronic commerce website has just placed China for “literally $ 80,000 in stockings,” says Tuchler. “Or will it cost me, like $ 200,000? How is such a business planned?”
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Uncertainty for commercial policy is triggered.(Bloomberg Economics)
If the scale is increased, the question facing Powell is very similar. If thousands of companies cannot calculate the costs of their inputs Or the tax rates of its exports, how can the Federal Reserve predict the economic trajectory?
An US tariff increase can upload inflation. The resulting pressure on consumers, together with the reprisals of other countries, can reduce production, hiring and investment. And these results are in opposite directions when establishing interest rates.
It is an example of how the president’s trade war Donald Trump has caused the global trade becomes a gigantic black boxand not by accident.
Your Treasury Secretary, Scott Bettingdescribes Trump’s approach as “strategic uncertainty”, a wink to the idea that keeping the counterparts out of the final objective that the USA can help you get better agreements. Whatever the result in commercial negotiations, it is a nightmare for anyone who tries to draw a path to follow, from companies to the central banks.
It is expected that The Federal Reserve holds the rates without changes in your meeting this week. Beyond that, the panorama becomes murky. Trump and now also Besent have been pressing the Central Bank to begin to make monetary policy more flexible. The market expectations of a measure in June are increasing.
Michael HansonJPMorgan Research’s senior economist, affirms that local public opinion is that there will be a cut in September, when the worst tariff inflation should begin to give in and it is likely that the labor market has weakened. However, it recognizes the unusual opacity derived from the commercial war in matters such as If there will be a recession In the United States this year.
“It is not clear immediately what the final result will be,” says Hanson, whose team tries to identify the channels most affected by tariffs, such as business investment, and how inflation could erode consumption. “We talk about risks and its distribution.”
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‘The complete idea’
This will also be key to the Federal Reserve approach. Their analysts always have a reference perspective. But this time, when analyzing commercial shocks in their models and analyzing the results in prices, growth and employment, the alternatives are likely to have greater weight.
“More than ever, scenarios analysis is really important,” he says Seth Carpenter, Morgan Stanley’s global chief economist.
Los Political responsible and companies seem to agree.
The Bank of Canada last month published two sets of forecasts to reflect different possibilities, instead of a single projection. United Airlines (Uual) took The unusual decision to issue two separate profits perspectivesone based on stability and the other in a recession induced by the commercial war.
Trump’s strategic uncertainty goes in the opposite direction to the evolution of world trade in the decades elapsed since World War II.
He Politics objective has been to generate order from chaosharmonizing a chaotic tariff system and creating fixed negotiation rules that allow countries to capitalize on their comparative advantage and access foreign markets.
That system was based on the idea that it made no sense that the more than 160 members of the World Trade Organization established individual tariffs at will, according to Alan Wm. Wolffformer sub -director of the World Trade Organization.
It contrasts markedly with the negotiating culture that Trump has introduced in the process, he says. “The central idea of commercial negotiations is certainty, not uncertainty.”
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‘Totally unpredictable’
Moreover, commercial policy tends to look forward, towards a definite final result, be it better markets for certain stronger strategic goods or alliances.
In the case of Trump, “there are many questions about how all this translates into a commercial policy and what are the underlying objectives,” he says Nathan SheetsCitibank global chief economist. “To what extent are tariffs imposing to eliminate them?”
The administration has made clear its objections to situation whendemanding, for example, a greater relocation of production in the United States. But that is a process that could take years to develop.
Meanwhile, the current situation is changing quickly.
Trump declared Sunday that Commercial agreements with some countries could be completed this weekwithout specifying which. The vice president Jd vance He declared Fox News last week that an agreement with India will probably be one of the first.
According to Carpenter of Morgan Stanley, something else may be needed to dissipate uncertainty. “One or two agreements are not going to dissipate relevant uncertainty,” he says. “The agreements must be durable and stay in force for a long time.”
Even if agreements are reached, It is not clear what will change. Trump and his advisors have indicated that they want to keep many tariffs in force.
It is likely that the 10% base tariff that imposed a month ago will be maintained, as well as tariffs on imports of metals and cars, and the next tariffs to products ranging from semiconductors and pharmaceutical products to wood.
Meanwhile, Tuchler says he doesn’t wait for everything to be completely clear. He continued with his order, thinking that it would be more risky to wait and possibly run out of means to sell on his website giftsforyouoow.com at Christmas.
“Everything has been completely unpredictable,” he said.
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