Speaking at the Economic Club of Chicago, Jerome "Jay" Powell warned that the increase in tariffs could lead to higher inflation and slower economic growth, which would further complicate the Fed’s efforts to maintain price stability and maximum employment.

"The new tariffs are significantly higher than expected, and the economic effects will likely include higher inflation and slower growth," Powell stated. He added that such a situation could lead to a "challenging scenario" in which the Fed’s goals—price stability and maximum employment—would be in conflict.

According to an analysis by Budget Lab at Yale University, the new tariffs could increase prices by 2.3% in the short term, costing the average American household about $3,800 per year. It is also predicted that the real U.S. GDP could be 0.9% lower in 2025.

Impact on Bosnia and Herzegovina

Although trade between Bosnia and Herzegovina and the United States accounts for about 1% of BiH’s total foreign trade, the new 35% tariffs on exports from BiH could significantly impact certain sectors, particularly the defense industry. Increased production costs and potential loss of market access could lead to reduced employment and slower growth in the affected industries.

Conclusion

The concern expressed by Fed Chairman Jerome Powell highlights the potential risks that the new tariff policies may pose not only to the U.S. economy but also to global economic stability. For Bosnia and Herzegovina, although direct trade relations with the U.S. are not dominant, indirect effects through global supply chains and increased costs could have significant consequences.

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