US tariffs may hamper efforts to cool inflation, says Fed official
April data showed the PCE price index increased 2.1% year-on-year, narrowly exceeding the Federal Reserve's 2% inflation target. (Reuters pic)
WASHINGTON : Shifts in US trade policy could hold back further progress in lowering inflation, a senior US central bank official said Tuesday, as President Donald Trump's sweeping tariffs ripple through the economy.
The US economy is 'still on a firm footing, but uncertainty has notably increased since the beginning of the year,' Federal Reserve governor Lisa Cook told a Council on Foreign Relations event in New York.
While the ultimate level of Trump's tariffs remains unknown as policy changes are ongoing, 'the effects are already noticeable,' she said.
In particular, Cook warned of higher inflation and a jobs market cooldown.
Price increases tied to policy shifts, in turn, 'may make it difficult to achieve further progress in the near term' when it comes to inflation, she added.
Typically, the Fed holds interest rates at a higher level if inflation is elevated and when inflation is low, the central bank can cut rates to boost economic activity.
For now, the Fed's preferred gauge of inflation – the personal consumption expenditures price index – rose 2.1% from a year ago in April.
This was down from a month prior, but slightly above the central bank's longer-run 2% target.
In a separate address in Iowa, Chicago Fed president Austan Goolsbee cautioned that encouraging inflation figures were 'old news,' saying they were the last reports before the effects of Trump's tariffs.
'Are the tariffs going to have a small impact?' he said. 'We gotta wait and see what happens.'
Cook added that 'the economic environment could become highly challenging for monetary policymakers.'
Besides changes to economic policy, the response of financial markets, businesses and consumers suggest risks to both price stability and unemployment, she noted.
'The recent post-pandemic experience with high inflation could make firms more willing to raise prices and consumers more likely to expect high inflation to persist,' she said.
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The Star
41 minutes ago
- The Star
Is China's promise of a new world order a self-serving power play?
As China has found itself in the midst of a rapidly escalating trade war with the United States after President Donald Trump launched global tariff measures, Beijing launched a sweeping outreach strategy intended to strengthen ties with Russian and Southeast Asian trade partners while also welcoming Latin American and European stakeholders. The multifront diplomatic charm offensive has had at its core one clear message: a shift to a multipolar world is accelerating, and Beijing is ready to work with partners to defend the 'rules-based, UN-centred' international system that has underpinned economic globalisation since World War II. Beijing's message holds that the post-war order, once symbolised by multilateral cooperation, is now being challenged by Washington's retreat under the banner of 'America first'. Observers have watched as China has amplified this theme to court Europe and the Global South, framing itself as a defender of multilateralism and a responsible stakeholder in the post-war system in contrast to what Washington now offers. But the analysts have also cautioned that divergent world views and competing national interests – as well as the strategic calculations of countries seeking to balance or benefit from US-China tensions – could undercut Beijing's vision of a multipolar world. China has used its membership in diplomatic platforms, such as the United Nations and the World Trade Organization, to highlight its World War II sacrifices and contributions to the post-war international order. During a visit to Moscow last month, Chinese President Xi Jinping told his Russian counterpart Vladimir Putin that both sides should work together to defend their second world war legacies, as well as the rights of developing nations to pursue an 'equal and orderly' multipolar world. Victor Gao, vice-president of the Centre for China and Globalisation, said Beijing has been reminding the world of the origins of the post-war international system. 'The international order established in 1945 was not unilateral from the outset – it was built on multilateralism, centred around the United Nations,' he said. 'The US launch of a global tariff war ... deprives other countries' rights to development, which China opposes.' Since Xi came to power, China has advanced its vision of a multipolar world order through initiatives such as the Global Development Initiative (GDI), the Global Security Initiative, and the Global Civilisation Initiative – all aimed at providing an alternative to the Western development model. The Belt and Road Initiative has been central to these initiatives to empower developing economies, alongside the expansion of Global South-focused blocs such as Brics. At the China-Community of Latin American and Caribbean States (Celac) Forumlast month, Xi highlighted a 'shared identity' with the region, calling for 'independent development paths' and joint efforts to promote multipolarity and reform global governance. In a separate meeting with African diplomats, Foreign Minister Wang Yi invoked a 'common destiny' shaped by historical injustice. Similar themes were echoed during Xi's April visit to Southeast Asia, seen as a 'back door' for China's exports to circumvent trade restrictions from Washington, where he has prioritised neighbourhood diplomacy and supply chain resilience in response to US tariffs. Gedaliah Afterman, a Chinese foreign policy specialist at Israel's Reichman University, described Chinese advocacy for a multipolar world order as both 'ideological and strategic.' 'This narrative resonates across the Global South, where China positions itself as a champion of 'pluralism' and 'win-win cooperation',' he said. 'However, China's embrace of multipolarity is selective and self-serving. While it publicly promotes a world of diverse centres of power, in practice it seeks to structure this order in ways that amplify its own influence.' Through its trillion-dollar Belt and Road Initiative, China is expanding its footprint across developing regions, including Latin America, Africa, Southeast Asia and the Middle East. The areas have become key destinations for Beijing to diversify its exports and supply chains, while also offering access to critical minerals amid US export controls. Gustavo de Carvalho, a senior researcher on African governance and diplomacy at the South African Institute of International Affairs, said Latin American and African countries embrace China's multipolar vision where it provides 'tangible benefits', such as technology transfers, industrial upgrades and 'institutional alternatives'. Latin American and African countries including Brazil and South Africa – both Brics members – have often backed China's push to reform global governance in favour of Global South interests. But 'rather than endorsing any particular power's vision of world order', these countries have hedged their ties with the US and Europe alongside China amid the US-China rivalry, de Carvalho said. He cited African nations ramping up lithium and battery production to serve both Chinese and Western markets, and Latin American countries pursuing trade deals with the European Union while deepening their economic ties with Beijing. 'This represents calculated hedging rather than ideological conversion,' de Carvalho said. Similar hedging strategies have also been adopted by Middle Eastern countries, as they position themselves to benefit from a future multipolar structure, Afterman said. 'China has found receptive ground for its multipolar vision in the Middle East, especially among states seeking greater strategic autonomy from Washington,' he said. 'For Gulf monarchies and other regional actors, multipolarity is not about endorsing a new global order but about expanding strategic space. These countries seek to balance between the US, China, Russia and others to advance their national interests.' '[But] divergences become clear when China's vision intersects with contested regional dynamics or entrenched security architectures ... China's growing economic role is evident, but whether it has the will or capacity to assume a meaningful political or security role in the region remains an open question.' Many Middle Eastern nations have long been reliant on US security guarantees, and the region has returned to the forefront of Trump's 'America first' strategy. His recent visit to the region secured billions of dollars in AI-related investments – an arena of intense competition between Washington and Beijing. At last week's China-Asean Gulf Cooperation Council forum in Malaysia, Chinese Premier Li Qiang pledged to deepen regional economic integration, aiming to build a market where investment, technology and talent move freely. While many Southeast Asian nations have been open to China's call for a multipolar world, they have also been assessing whether Beijing was 'fully living up to' the ideals it has been pitching, especially when it comes to its approach on the South China Sea, according to Dylan Loh, a Chinese foreign policy specialist at Nanyang Technological University in Singapore. 'While [China] speaks of an equitable, multipolar and just world, [Southeast Asian] states are also assessing if this is the case. Its actions in the South China Sea, for instance, are seen by some as not fully aligning with some of the principles it espouses,' he said. Long-standing sovereignty disputes over the resource-rich region have strained China's relations with several Asean members. The contested waterway has also increasingly become a flashpoint for military tensions between China and US allies. Shi Yinhong, an international relations professor at Renmin University, said multipolarisation may offer smaller nations greater room to manoeuvre but also more pressure to choose sides. It remained doubtful that Trump's 'isolationism' would provide more room for China to increase its influence in the developing world, he added, noting that issues such as the South China Sea, Iran and Russia's war in Ukraine would continue to strain China's relations with Europe and the Global South. 'Apart from some limited and somewhat empty diplomatic gains, China's financial resources will be further squeezed, especially with that consumptive overseas involvement, if the Belt and Road Initiative has not been implemented effectively.' China has begun pivoting its belt and road spending toward more financially sustainable projects in green energy and hi-tech sectors as it continues to face economic headwinds. Many economists have predicted that sustained US tariffs would further slow its economy. Jo Inge Bekkevold, a Senior China Fellow at the Norwegian Institute for Defence Studies, said China's push for multipolarity has gained a lot of traction in the Global South, but less so in Europe. China has long seen the EU as a key pole in a multipolar world, urging Brussels to maintain 'strategic autonomy' as the bloc has aligned with Washington to counter Beijing's influence. EU-China relations have shown signs of thaw as transatlantic ties have been strained over Trump's tariffs and Ukraine policies. In a recent exchange of notes with European Commission President Ursula von der Leyen and European Council President Antonio Costa to mark 50 years of diplomatic ties, Xi called the EU a 'major force' in building a multipolar world alongside China. Bekkevold said Europe had not fully agreed with 'America's threat assessment of China' due to geographic distance, which has also allowed it more room to hedge and sustain economic ties with Beijing. At a May forum hosted by the EU delegation to China, European experts also pointed out that while Brussels and Beijing shared an interest in preserving UN-based multilateralism, their strategies and interpretations of it differed. When asked about possible EU cooperation with Brics, Justyna Szczudlik, deputy head of research and coordinator of the Asia-Pacific Programme at the Polish Institute of International Affairs, said Brics was 'China-led multilateralism', adding that the bloc had its 'own agenda' with the Global South. The EU has also diversified its global partnerships, recently signing a major trade agreement with the South American trade bloc Mercosur and pursuing a deal with India by year's end. According to Amit Ranjan, a China-India relations expert at the National University of Singapore, India saw multipolarisation as a way to gain influence in global governance. 'India also projects itself as an important player in world politics and world diplomacy. Therefore, India always calls for reformed multilateralism, because in the current multilateral structure, especially like the UN, it does not have a suitable space for New Delhi,' he said. Ranjan pointed to the UN Security Council, where India's bid for permanent membership has been blocked by China, which has been reluctant to share its status as the sole Asian permanent member amid concerns it could dilute Beijing's influence. Ranjan added that, like China, India has also considered itself a leader for the Global South and has been engaging with state players. Since 2023, India has hosted the annual Voice of Global South Summit with more than 100 nations taking part. It has long pushed back against China's dominance in Brics and the Shanghai Cooperation Organisation and has refused to endorse the Belt and Road Initiative. Additional reporting by Dewey Sim - SOUTH CHINA MORNING POST
Free Malaysia Today
an hour ago
- Free Malaysia Today
Wrongly deported Salvadoran migrant arrested on return to US
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BusinessToday
2 hours ago
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