---
title: "Federal Reserve's Musalem: Tariffs may suppress economic growth and employment"
description: "Federal Reserve Bank of St. Louis President James Bullard stated that tariffs could put pressure on the U.S. economy and labor market, although both the U.S. and China have recently agreed to lower ta"
type: "news"
locale: "en"
url: "https://longbridge.com/en/news/241114618.md"
published_at: "2025-05-20T23:19:02.000Z"
---

# Federal Reserve's Musalem: Tariffs may suppress economic growth and employment

> Federal Reserve Bank of St. Louis President James Bullard stated that tariffs could put pressure on the U.S. economy and labor market, although both the U.S. and China have recently agreed to lower tariffs. He pointed out that tariffs could suppress economic activity and lead to a weak labor market, while emphasizing that monetary policy needs to focus on inflation expectations. Bullard believes that the current economy still shows potential strength, and the financial environment supports investment and hiring, but uncertainty remains

According to the Zhitong Finance APP, St. Louis Federal Reserve President James Bullard stated that tariffs could put pressure on the U.S. economy and weaken the labor market.

In a speech at an event in Minneapolis on Tuesday, Bullard said, "Even after the tensions eased on May 12, these trade frictions still seem likely to have a significant impact on the short-term economic outlook." Earlier this month, the U.S. and China announced plans to significantly reduce each other's tariffs within 90 days, while officials from both sides are working to negotiate a trade agreement.

Bullard added, "Overall, tariffs may suppress economic activity and lead to further weakness in the labor market."

Bullard indicated that monetary policy is prepared to respond to any changes in the economic outlook, while emphasizing that officials should closely monitor inflation expectations.

Bullard stated that as long as Americans' expectations for future prices remain stable at the Federal Reserve's 2% target level, the Fed can respond to inflation and employment in a "balanced manner."

Bullard remarked, "Now is the time to maintain public confidence in the continued fight against inflation."

Atlanta Federal Reserve President Raphael Bostic stated at another event on Tuesday that volatility in the U.S. Treasury market could exacerbate the already high uncertainty, but he noted that the current market operations do not pose a risk.

Bostic said, "There is a lot of uncertainty right now, which is why I am satisfied with our current policy stance. I think if more uncertainty arises, I may have to delay the timeline for returning to normal, as I believe it will take longer to resolve the issues."

**Two Inflation Scenarios**

The Federal Reserve has kept interest rates unchanged this year to observe the economy's response to new policies regarding trade, regulation, taxation, and immigration. Bullard stated that the U.S. economy continues to show "potential strength." He noted that although surveys indicate a decrease in the number of businesses planning investments and hiring, the financial environment, such as bank loans, still provides support.

Bullard reiterated that the probabilities of the two inflation scenarios are equal—price pressures from tariffs could be temporary or more persistent. He stated that if trade negotiations succeed and tariffs are reduced, the economy could continue to approach its previous trajectory, and inflation would continue to cool towards 2%.

Bullard indicated that if inflation only temporarily rises, the Federal Reserve might ease policies to support the labor market. However, this also carries risks.

He stated, "Committing now to ignore the impact of tariffs on inflation or to ease policies carries the risk of underestimating the level and duration of inflation. I believe that in the face of persistent inflationary pressures that could disrupt long-term inflation expectations, policy should prioritize price stability."

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> **Disclaimer**: This article is for reference only and does not constitute any investment advice.
