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Federal Reserve Governor Cook: It is expected that the trade policies of the Trump administration and related uncertainties will weigh on productivity growth in the short term, which may prompt the Federal Reserve to maintain policy interest rates unchanged for a longer period.
The decline in productivity and the slowdown in potential economic growth will bring greater inflationary pressures.
All else being equal, lower productivity may lead me to support keeping interest rates at a higher level for a longer time.
Due to uncertainty about the final level or duration of tariffs, trade policy uncertainty may reduce business investment, thereby affecting productivity.
If protectionist trade policies support less efficient companies, or if these changes lead to supply chain disruptions, productivity may also be impacted.
Artificial intelligence could improve U.S. productivity in the coming years, potentially offsetting the negative effects of trade policies