Chicago Fed President Austan Goolsbee expressed concern that escalating trade tensions—through tariffs, retaliations, and potential counter-retaliations—could recreate the turbulent economic conditions of 2021–2022 when inflation was “raging out of control.”
In an interview with CNN, he warned that if the tariff threats materialize to their full extent, especially if met with proportionate responses, the US economy risks slipping back into a period of high inflation and stagnating growth.
However, Goolsbee also acknowledged that the situation remains fluid. He noted that negotiations could yet defuse the tension, especially if they result in new trade agreements. Referring to Treasury Secretary Scott Bessent’s optimism about a coming “golden age of trade.”
If stagflation begins to take hold, Goolsbee stressed, the Fed’s response would not be straightforward. The appropriate policy path would depend heavily on how growth and inflation evolve in the coming months.
“Our job is to look at the hard data,” he said, underlining that in a scenario where both growth weakens and prices surge, there’s no “generic answer” to guide monetary policy.
