Fed's Barr: The US economy is on solid footing, though trade policies cloud the outlook

Federal Reserve (Fed) Board of Governors member Michael Barr spoke at the New York Fed's Small Business Credit Symposium on Thursday, noting that although the United States (US) economy is maintaining a solid stance according to the data, dark clouds caused by the Trump adminsitration's lopsided trade strategy makes it difficult for the Fed to make moves.

The Fed's Barr noted that high tariffs expose US businesses, particularly small businesses, to significant downside risks. Barr highlighted that the US could be poised to suffer trade shocks at the hands of President Trump's overabundance of import taxes, and could re-ignite inflation if supply chains destabilize, or businesses begin to buckle and fail under a rapid increase of untenable costs pushing firms into unprofitability.

Key highlights

US economy on a solid footing with inflation heading to 2%, though trade policies have clouded the outlook.

Trade shock could be particularly hard on small businesses and trigger price increases if supply chains are affected or firms fail.