US stock markets faced significant losses on Wednesday after Federal Reserve Chair Jerome Powell expressed concerns about President Donald Trump’s tariff policies. Powell described the tariffs as unprecedented in recent times and noted that their full impact remains uncertain. The Dow Jones Industrial Average fell by 700 points, or 1.73%, the SP 500 dropped 2.24%, and the Nasdaq Composite saw the biggest decline, plunging 3.07%. Powell pointed out that these tariff measures represent fundamental policy changes, emphasizing that there is no modern precedent for understanding their long-term effects.

Powell also warned that the magnitude of the tariffs could lead to higher inflation and slower economic growth, creating potential conflicts with the Federal Reserve’s goals of maintaining price stability and full employment. His comments contributed to increasing uncertainty among investors, who are already dealing with the volatility caused by shifting trade policies from the Trump administration. Data from the Commerce Department showed that retail sales in March rose at their fastest pace in over two years, suggesting that consumers may have rushed to make purchases before the full impact of the tariffs took hold.

Meanwhile, Nvidia’s shares dropped by 6.87% after the company revealed it expected a $5.5 billion loss due to new US restrictions on exporting AI chips to China. This restriction is part of the ongoing US-China rivalry over artificial intelligence dominance, fueled by the rapid growth of China’s AI sector. Powell indicated that despite these challenges, the Federal Reserve would maintain its current course until clearer economic signals emerge. While the US economy remains stable for now, the Fed is closely monitoring the impact of ongoing trade disruptions.

The Trump administration’s tariff measures have been sweeping, including 25% duties on steel and aluminium, similar tariffs on goods from Mexico, Canada, and China, as well as a 10% tariff on all US imports. While some exemptions have been granted for electronics, additional tariffs on other goods like semiconductors, pharmaceuticals, and copper are expected.

Powell clarified that despite President Trump’s claim that tariffs are paid by foreign countries, the burden will fall on American consumers and businesses. He predicted that higher unemployment and rising inflation are likely outcomes, adding that the public will ultimately bear much of the cost of the tariffs. However, the full extent of inflation remains uncertain.

Disclaimer: This image is taken from Federal Reserve.