Trump Tariffs May Trigger Brief Artificial Economic Boost Before Summer Slowdown, Warns Fed's Goolsbee

Chicago Federal Reserve Bank President Austan Goolsbee has warned that businesses stocking up on inventory before the next tariff decisions could lead to an artificial spike in economic activity, followed by a fall by summer.

"We heard a lot about preemptive building up of inventories that could last 60 days, 90 days, if there were going to be more uncertainty," Goolsbee said at CBS's "Face the Nation."

Goolsbee, a former member of Barack Obama's cabinet, pointed out that the auto industry is one of the most likely sectors to fill inventories of different parts, components, and supplies before new tariffs take effect.  

After unveiling higher-than-expected tariffs on a host of countries on April 2, Trump has paused tariffs on most countries for 90 days to allow negotiations.

However, he has maintained a tariff rate of 145% on Chinese goods after Beijing retaliated with its reciprocal tariffs on U.S. imports.

"Activity might look artificially high in the initial, and then by the summer, might fall off because people had bought it all and brought it forward," Goolsbee said.

The U.S. is still maintaining 10% tariffs on all imports. The current pause on tariffs expires on July 9 unless an extension is granted.

Goolsbee also said the central bank's independence is essential amid concerns over the Trump administration's efforts to oust Fed Chair Jerome Powell.

"I strongly hope that we do not move ourselves into an environment where monetary independence is in question," Goolsbee said.

Trump criticized Powell in a Truth Social post last week, claiming the Fed chair's "termination can't come fast enough."

The Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100, was up 0.3% in after-hours trading on Thursday, while the SPDR S&P 500 ETF Trust (SPY) rose 0.2%.

Also See: Trump Firing Powell Could Spark Market ‘Crash’, Turn US Into ‘Two-Bit Dictatorship,’ Elizabeth Warren Cautions

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