Trump Tariffs — Economist Mohamed El-Erian Says More Bumps Expected, Fed’s Hands Tied Due To Inflation Problem

Allianz SE Chief Economic Advisor Mohamed El-Erian expects more bumps ahead in the wake of the ongoing Trump tariff wars as tit-for-tat tariffs dominate in the interim, the Federal Reserve remains constrained by higher inflation, and markets are forced to reprice the growth outlook outside the U.S.

In a Bloomberg Opinion interview, El-Erian noted that the Fed has its limitations. “The Fed
cannot come and save you because the Fed has an inflation problem. So, the probability of making a mistake is higher than it’s been for a long time,” he said.

The economist expressed concerns over the Trump administration’s tariff policies and questioned the rationale.

“If I had a magic wand, I would like to hear from the White House what they’re really trying to do with tariffs,” Erian said, asking, “Are they trying to raise revenue, or looking for a fairer trading system, which means tariffs are just a negotiating tool?”

According to the CME FedWatch Tool, traders have factored in four rate cuts this year, with the upcoming reduction in June 2025. Before the tariff imposition, the market had priced in just two rate cuts in 2025.

This aligned with the dot plot projections of the Fed from its latest policy.

On Tuesday, Donald Trump said he had a “great call” with South Korea’s Acting President Han Duck-soo to negotiate tariffs.

“I just had a great call with the Acting President of South Korea. We talked about their tremendous and unsustainable Surplus, Tariffs, Shipbuilding, large scale purchase of U.S. LNG,” Trump said in a post on his social media platform Truth Social.

Meanwhile, equity markets appeared to have stabilized on Tuesday following Monday's carnage, which was driven by the administration’s defiant stand on tariffs.

The SPDR S&P 500 ETF Trust (SPY) traded 0.12% higher, while the Invesco QQQ Trust, Series 1 (QQQ) was up 0.24% by Tuesday afternoon.

Also See: Trump Tariffs Criticized By Republican Megadonor And Home Depot Co-Founder Ken Langone: 'I Don't Understand The... Formula'

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