At the Economic Club of Chicago, Federal Reserve Chair Jerome Powell was asked about long-term uncertainty caused by tariff policy.
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00:00I want to pick up on a word that is often used today, uncertainty.
00:05As a respondent to a Dallas Fed survey said,
00:08I've never felt more uncertainty about my business in my entire 40-plus years career.
00:15The worry today is not just about immediate policy uncertainty,
00:18but an entire change in the U.S.'s economic philosophy.
00:22Not just policy uncertainty, so to speak, but structural uncertainty.
00:26You know, one of the effects, as you've pointed out, of higher levels of uncertainty
00:31is that firms postpone investment.
00:34For instance, even after the tariffs stabilize,
00:37firms that contemplate reshoring production facilities will hesitate,
00:42not knowing if the tariffs will be reversed in the future, maybe by the next administration.
00:47How do you take such longer-term uncertainty into account in your policies?
00:51Let me just agree that what comes back very strongly, and everyone will understand this,
01:05these are very fundamental changes in long-held, in some cases, policies in the United States.
01:11And there's not any real experience.
01:14I mean, the Smoot-Hawley tariffs were actually not this large, and they were 95 years ago.
01:19So there isn't a modern experience of how to think about this.
01:22And businesses and households are saying in surveys that they are experiencing incredibly high uncertainty.
01:30There's a lot of research, some of it from the Fed,
01:33showing that that does lead to businesses and households stepping back from decisions,
01:40which, of course, makes common sense.
01:42And, you know, you hope that that's something that you go through a phase,
01:47and then you know what the things become more certain.
01:51And therefore, you know, people can resume normal economic activities,
01:56given their understanding of what is the new normal.
01:58I mean, your question really is, what if the uncertainty remains high?
02:02I think that's a difficult environment.
02:03I think, you know, I think people's expected rates of return would have to be higher.
02:07I think people would be – that would weigh on, to me, investment just in general.
02:14If the United States were to become a jurisdiction where risks are just structurally higher going forward,
02:20that would make us less attractive as a jurisdiction.
02:23We don't know that at this point, but I think that would be the effect.
02:27Well –