Berliner Boersenzeitung - Trump tariffs provoke growing economic uncertainty

Powell said tariffs are "highly likely" to provoke a temporary rise in prices and could prompt "more persistent" increases.

He also noted the "volatility" on the markets in a "time of high uncertainty."

That disruption was visible on Wall Street where the Nasdaq plummeted more than four percent, the S&P more than three percent and the Dow Jones more than two.

Leading the downward charge was Nvidia, which dropped more than 10 percent after disclosing major costs due to new US export restrictions on semiconductors imposed as part of Trump's tussle with China.

World Bank chief Ajay Banga echoed Powell, telling reporters that, "uncertainty and volatility are undoubtedly contributing to a more cautious economic and business environment."

Trump remains upbeat.

He is banking that his strategy, in which tariffs are meant to lead to multiple individual trade agreements, will lower barriers to US products and shift manufacturing to the United States.

He said he would meet a Japanese delegation Wednesday both on tariffs and another of his longtime complaints -- the cost of the US military deployments to defend the crucial Pacific ally.

But the negotiations run parallel to a deepening confrontation with top US economic rival China.

While the rest of the world has been slapped with a blanket 10 percent tariff, China faces levies of up to 145 percent on many products. Beijing has responded with duties of 125 percent on US goods.

"If the US really wants to resolve the issue through dialogue and negotiation, it should stop exerting extreme pressure, stop threatening and blackmailing, and talk to China on the basis of equality, respect and mutual benefit," Chinese Foreign Ministry spokesman Lin Jian said.

"There is no winner in a tariff war or a trade war," Lin said, adding: "China does not want to fight, but it is not afraid to fight."

China said on Wednesday that it saw a forecast-beating 5.4 percent jump in growth in the first quarter as exporters rushed to get goods out of factory gates ahead of the US levies.

But Heron Lim from Moody's Analytics told AFP the impact would be felt in the second quarter, as tariffs begin "impeding Chinese exports and slamming the brakes on investment."

World Trade Organization head Ngozi Okonjo-Iweala said the uncertainty brought by the tariffs "threatens to act as a brake on global growth, with severe negative consequences for the world, the most vulnerable economies in particular."

- Japan test case? -

Ahead of the Japan talks, Trump posted on his Truth Social platform that he hoped "something can be worked out which is good (GREAT!) for Japan and the USA!"

Japan's envoy said he was optimistic of a "win-win" outcome for both countries.

South Korea, a major semiconductor and auto exporter, said Finance Minister Choi Sang-mok would meet US Treasury Secretary Scott Bessent next week.

"The current priority is to use negotiations... to delay the imposition of reciprocal tariffs as much as possible and to minimize uncertainty for Korean companies operating not only in the US but also in global markets," Choi said on Tuesday.

But Stephen Innes at SPI Asset Management called the discussions with Japan the "canary in the tariff coal mine."

"If Japan secures a deal -- even a half-baked one -- the template is set. If they walk away empty-handed, brace yourself. Other nations will start pricing in confrontation, not cooperation," he wrote in a newsletter.

The Daiwa Institute of Research warned on Wednesday that Trump's reciprocal tariffs could cause a decline of 1.8 percent in Japan's real GDP by 2029.

Although popular among Republicans, the tariffs war is politically risky for Trump at home.

California Democratic Governor Gavin Newsom announced he was launching a new court challenge against Trump's "authority to unilaterally enact tariffs, which have created economic chaos, driven up prices, and harmed the state, families, and businesses."

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(Y.Berger--BBZ)