American consumers are about to be squeezed out! Richmond Federal Reserve Chairman Warns Businesses May Not Be Able to Pass on Tariff Costs Through Price Increases

The Zhitong Finance App learned that on Friday, Federal Reserve Chairman Barkin of the Federal Reserve's Richmond warned that although companies may want to pass on tariff costs through price increases, in reality, consumers' affordability is already close to the limit, and this strategy is not easy to work.

“What I've heard from retailers is that consumers have almost been squeezed out,” Barkin said during the “Policy Makers Series” event at the Loudon Chamber of Commerce in Virginia. “It sounds easy to say you want to pass on costs, but it's really not that easy.”

Earlier this week, the Federal Reserve decided to keep interest rates unchanged and indicated that in the context of the Trump administration's imposition of tariffs, the risk of inflation and unemployment is rising, and overall economic uncertainty is also increasing. Federal Reserve Chairman Powell said that the ongoing trade negotiations between China and the US may “significantly change” the current situation.

Despite this, Barkin believes that the fundamentals of the US economy remain stable, and that consumption and corporate investment are still “performing well.” Consumer confidence indicators are weak, but there has been no significant impact on consumer spending.

In an interview with reporters after the event, Barkin confessed that he was evaluating whether tariffs might be a big enough drag on the economy, thus triggering a deflationary effect. “We saw a similar situation in 2008,” he said, “but there were many times when there was no deflation. The key depends on whether demand falls significantly.”

He pointed out that the impact of this tariff policy is not a short-term event that “ends after a price shock within a month”. “We are facing a complex change that will gradually unfold across multiple fields.”

Although Barkin did not have the right to vote in the Federal Open Market Committee this year, his views on consumption and investment prospects are an important reference for the Federal Reserve's policy formulation. He has also stressed many times that tariffs may simultaneously drive up inflation and unemployment, causing the Federal Reserve to face an even more difficult dilemma.

Meanwhile, US President Trump called out a statement on “imposing 80% tariffs on China” via social media on the eve of negotiations, which once again triggered market fluctuations. “Imposing an 80% tariff on China sounds reasonable!” He wrote in his post and named Treasury Secretary Bezent to promote relevant policies. Affected by this news, the S&P 500 index and the Dow closed down, while the NASDAQ closed down, erasing gains at the time of opening. China and the US will meet in Switzerland this weekend. This is the first formal meeting between the two countries since trade frictions fully escalated.

Notably, despite Trump's imposition of high tariffs on several countries in April, he soon announced a 90-day buffer period for negotiations. Recently, he announced that the first trade agreement has been reached with Britain, but the agreement did not meet the “comprehensive agreement” standards previously promised, and many key details are still to be discussed.