The Morning Edge: Powell Warns of Economic Crosswinds as Trump Tariffs Reshape Outlook

Federal Reserve Chair Jerome Powell struck a sobering tone on Friday, warning that President Donald Trump’s newly announced tariffs are “larger than expected” and could carry significant economic fallout, including slower growth and higher inflation. Speaking at a conference in Virginia, Powell acknowledged the uncertainty gripping the economy, noting the Fed now faces the risk of both rising unemployment and elevated inflation—undermining its dual mandate. 

The Fed Chair made it clear that the central bank is in no rush to respond with sweeping monetary easing, despite mounting pressure. While he refrained from criticising Trump’s policies directly, Powell underscored the growing unpredictability surrounding trade and its impact on inflation expectations. He warned that while tariffs may cause a short-term spike in prices, there's a real risk they could lead to more persistent inflation if left unchecked. “Our obligation is to keep longer-term inflation expectations well anchored,” Powell said, hinting at the fine line the Fed must walk between market support and inflation control. Just weeks ago, the economy seemed to be in a “sweet spot”—now, Powell said, “uncertainty is high,” and the path forward is anything but clear.

Data
The US economy added 228,000 jobs in March, far surpassing expectations of 135,000, though February’s figures were revised down to 117,000 from 151,000. The unemployment rate ticked up slightly to 4.2%, suggesting the labour market remains robust—but President Trump’s sweeping tariffs now threaten to undermine this strength. Business confidence is wavering amid stock market turmoil and fears that trade barriers could dampen hiring. While March’s payrolls signal resilience, economists warn the true test will come in the coming months as tariffs ripple through the economy.

Markets
Overnight
US stocks suffered their worst two-day collapse since the pandemic, with the Nasdaq officially entering bear market territory (-20% from peak) and the Dow sliding into correction as Trump's trade war with China spiralled. The Dow plummeted 9.3%, the S&P 500 crashed 10.5%, and the Nasdaq plunged 11.4% over Thursday-Friday – wiping out trillions in market value. China-exposed stocks were hammered: Apple sank 7.3%, while JD.com, Alibaba, and Baidu all dropped over 7.7%. The S&P Banks index collapsed 7.3% as investors priced in lower profitability from looming Fed rate cuts and tariff-driven economic damage. 

A sharp flight to quality drove 10-year US Treasury yields below 4% on Friday for the first time since Donald Trump’s election, as investors sought safety amid mounting market volatility triggered by his aggressive tariff hikes. The benchmark 10-year yield plunged 30 basis points to 3.95%, marking its biggest weekly drop since August, as bond prices surged. The 2-year yield also slid, falling 5.5 basis points to 3.67%, reflecting growing risk aversion and rising bets on Fed rate cuts. The Treasury rally came alongside a sharp sell-off in US equities and the dollar, both of which endured their worst sessions in years on Thursday.

The US dollar rebounded sharply on Friday after Federal Reserve Chair Jerome Powell acknowledged the inflationary risks posed by steep new tariffs and struck a cautious tone on the path ahead for monetary policy. Powell warned that the larger-than-expected US tariffs could lead to both higher inflation and slower growth, complicating the Fed’s policy outlook. After plunging 1.9% on Thursday—its worst single-day drop since November 2022—the dollar index rose 0.98% to 103. 

Brent crude oil prices plunged on Friday, posting their steepest drop in over three years, as escalating trade tensions between the US and China stoked fears of a global recession. China, the world’s largest oil importer, announced a sweeping 34% tariff on all US goods effective April 10, intensifying the trade war just after US President Trump raised tariffs to historic highs. Brent crude fell $4.56, or 6.5%, to settle at $65.58 a barrel. The benchmark hit four-year lows during the session—Brent at $64.03—as investors priced in weaker demand amid growing economic uncertainty.

Day’s Ledger
Economic Data:
 - Eurozone February retail sales data
 - China March FX reserves data

Corporate Actions:
 - BF Utilities to detail Jan-Mar Earnings

Policy:
 - US President Trump to meet Israel’s Netanyahu

Tickers

• ASTRAZENECA PHARMA INDIA received approval from CDSCO to import and distribute TAGRISSO (Osimertinib tablets) for an additional indication in treating NSCLC with EGFR gene mutations.
• BIOCON board approved the issue of commercial papers up to ₹6 billion via private placement in one or more tranches.
• FEDERAL BANK Executive Director Shalini Warrier resigned; her last working date will be between May 15 and May 31.
• FORCE MOTORS reported March 2025 total sales of 3,700 units, up 0.87% on year. Domestic sales rose 11.02%, exports fell 77.62% to 94 units.
• GODREJ PROPERTIES signed a development deal for prime land in Versova, Mumbai, with revenue potential of ₹13.5 billion.
• ITC acquired 262,000 equity shares of Ample Foods for ₹1.31 billion, raising its stake to 43.75%.
• MAZAGON DOCK SHIPBUILDERS will offer an additional 4.769 million shares (1.18% stake) in its OFS on April 7, over the base size of 11.4 million shares (2.83%).
• MOTILAL OSWAL FINANCIAL SERVICES received DIFC approval for setting up a step-down subsidiary in Dubai for wealth management services.
• PURAVANKARA subsidiary Starworth Infrastructure received an LOI from Ranka Properties for the ₹1.19 billion Ranka Ankura project.
• TATA MOTORS' subsidiary Jaguar Land Rover will pause US shipments in April due to tariffs imposed by President Trump.
• TATA STEEL received a tax reassessment order adding ₹251.86 billion to income for FY19. It has challenged the move in Bombay High Court, citing debt waiver cannot be taxed.
• TVS MOTOR COMPANY will enhance its EV presence in Southeast Asia by integrating ION Mobility’s assets, IP, and talent into its operations.

Must Read

• Credit card defaults up 28% last year, touched Rs 6,742 crore
• India to focus on trade deal, avoids retaliation on US tariffs
• $20 billion IT contracts up for renewal amid GenAI wave, global uncertainties
• Finance ministry to study EPFO, global models for UPS investment plan
• Tata Capital files for confidential IPO with Sebi, eyes ₹150 billion listing
• Recessionary phase not ruled out in key economies, says Montek
• MUFG nearing stake buy in Yes Bank at $6.5-7 b valuation
• The debt of Indian States continues to pile high 
• EU seeks unity in first strike back at Trump tariffs
• China Floats Rate Cuts, Stimulus to Counter Trump Tariff Hit