Fed chair says Trump tariffs could make inflation worse as US stocks slide further

The US Federal Reserve chair, Jerome Powell, warned Donald Trump’s tariffs were generating a “challenging scenario” for the central bank and were likely to worsen inflation, Report informs via The Guardian.

Powell’s comments on Wednesday came US stock markets had already been rattled by a new trade restriction on the chip designer Nvidia. The sell-off picked up as Powell spoke to The Economic Club of Chicago.

“The new administration is in the process of implementing substantial policy changes in four distinct areas: trade, immigration, fiscal policy and regulation. Those policies are still evolving, and their effects on the economy remain highly uncertain,” said Powell.

Powell said the US economy was well-positioned but added that Trump’s tariffs were likely to cause “at least a temporary rise in inflation. The inflationary effects could also be more persistent.”

Nvidia, the California company at the heart of the revolution in artificial intelligence technology, lost billions of dollars from its market value at the opening bell, with its shares down 8.5% by early afternoon.

The sell-off, which has spread to semiconductor makers in Asia and Europe, comes after Nvidia said the Trump administration had restricted the sale of its H20 chip in China by means of new license requirements.

The company now expects to report a $5.5bn (£34.1bn) hit in its financial quarter that ends on 27 April, covering the cost of licenses for its stock of the chips and associated sales commitments.

The US restriction will also hit the MI308 processor made by rival chip business Advanced Micro Devices (AMD). Its shares dropped 6.5% as it expects to take a charge of as much as $800m because of the new rule.