Chicago Federal Reserve Bank President Austan Goolsbee expressed concerns about the impact of President Donald Trump's tariffs on businesses, emphasizing the need for the central bank to analyze concrete data before determining its policy response.

Goolsbee outlined that if the tariffs are imposed as threatened and lead to significant retaliation, it could potentially reignite conditions similar to those experienced in the early 2020s when inflation was a major concern. He highlighted the potential for negotiations to result in new trade agreements that could prevent steep tariffs, referencing U.S. Treasury Secretary Scott Bessent's optimism about a prosperous era for trade.

Following Trump's announcement of tariffs and the subsequent responses from China and the European Union, global stock markets experienced significant declines amid fears of a escalating trade conflict. Goolsbee cautioned that this uncertainty could impact consumer and business spending, potentially necessitating action from the Federal Reserve to mitigate any adverse effects.

Goolsbee emphasized that the Fed's response to economic conditions would be based on careful examination of indicators such as prices and economic growth trends. He stressed that if the situation leads to stagflation - a combination of economic stagnation and rising prices - there is no one-size-fits-all solution for the Fed to implement.

(Adapted from a Reuters article by Ann Saphir, with edits by Tom Hogue and Sam Holmes)