Another round of trade tariffs between the US and China would have a material impact on US consumers, according to the president and CEO of Atlanta’s Federal Reserve Bank.
Speaking at the European Financial Forum in Dublin, Raphael W Bostic said that the cost of the tariffs imposed to date had largely been absorbed by businesses.
However conversations he had had indicated that there was no capacity to do that with any further tariffs, which means consumers would feel their effect for the first time.
This could have a significant impact on the domestic US economy, Mr Bostic said, as his organisation’s research had found that 40% of households could not absorb a $400 shock to their finances.
The US and China are currently holding high level talks on trade, with the start of March set as a deadline for an agreement.
The US has threatened to increase tariffs on $200 billion worth of Chinese imports if a deal is not reached by that point.
However US President Donald Trump has signaled his willingness to go beyond that date if good progress has been made by the two sides.
Trade tensions, along with economic slowdowns around the globe, had led to increased uncertainty amongst US businesses, Mr Bostic told today's forum.
He said the firms he has spoken to are re-evaluating their outlook for 2019.
Mr Bostic said that, if everything performs as expected, he expects there to be one interest rate rise in the US this year.
This compares to a previous forecast for as many as three rate increases during 2019.
When asked if this represented a change in tact by the Federal Reserve, Mr Bostic said he did not believe it did.
However he said people may have misunderstood what the Fed was trying to do.
He said that it was seeking to make its way to a "neutral" interest rate, but they had to move more cautiously as they got closer to that goal.
Various sources of uncertainty were further complicating that and the Fed president expressed hope that they could be resolved sooner rather than later.
That included the threat of a further US government shutdown, which he said not only impacted upon economic activity but also limited the amount of data the Federal Reserve was able to gather.
Mr Bostic also said the Fed would continue to wind down its balance sheet, however its policy has been to do this in a way that does not distort the market.
He also said the ultimate target would still leave the institution with a far bigger balance sheet than it had before the financial crisis.
But he would not put a figure on the exact amount that would represent.
