After Cars, Reciprocal Tariffs Arrive... Complex Interest Rate Paths for Major Countries Due to Trump

Fed: "Maintaining Policy Until Tariff Impact Becomes Clear"
ECB: "Difficult to Comment on April Rate Decision"
Japan: "Low Possibility of BOJ Rate Hike in May"

Following U.S. President Donald Trump's imposition of a permanent 25% tariff on imported cars, reciprocal tariffs are scheduled to be announced on the 2nd of next month. Since tariffs could negatively impact not only other countries but also the U.S. economy, major central banks appear to be postponing interest rate decisions.

According to Bloomberg on the 27th (local time), Susan Collins, President of the Federal Reserve Bank of Boston, said at an event held in Boston that day, "It seems inevitable that tariffs will increase inflation in the short term."

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President Collins stated, "My personal outlook is that it (inflation) will be short-term and that some disinflation will continue. However, the timing may be pushed back further than previously expected."

The day before, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, said that the Fed should maintain its current monetary policy stance until the impact of tariffs becomes clear.

Reuters reported that with the reciprocal tariffs announcement scheduled for next week, Fed officials are showing a pattern of holding off on interest rate decisions. The U.S. Federal Reserve (Fed) decided to keep the benchmark interest rate unchanged on the 19th of this month, following the freeze in January. According to the Chicago Mercantile Exchange (CME) FedWatch tool, the federal funds futures market sees a 12.9% chance of a rate cut in May and a 63.1% chance of a rate cut by the end of June.

The European Central Bank (ECB), which has cut rates six times since June last year, is in cautious mode. With President Trump announcing tariffs and European countries considering increasing defense spending as the U.S. attempts to withdraw from European security, the situation is complex.

Luis de Guindos, Vice President of the ECB, said at an event held in Brussels, Belgium, that day, "It is very difficult to say what we will do in April," adding, "I hope to have a clearer understanding of the final outcome regarding tariffs. Then we will decide accordingly."

Pierre Wunsch, Governor of the National Bank of Belgium, said in an interview with U.S. CNBC that President Trump's tariff policy is complicating the future interest rate path of the ECB. Governor Wunsch said, "I still think the possibility of us having to raise rates is limited," but added, "If tariffs affect inflation and negatively impact growth, it will be a difficult equation, and we may need to consider a temporary pause (in rate hikes). I am not advocating (for a rate freeze), but I think it should be part of the discussion."

The possibility of a May rate hike by the Bank of Japan (BOJ) has also diminished. Atsushi Takeda, Chief Economist at Itochu Research Institute, told Bloomberg, "The possibility of a rate hike in May has become even lower," adding, "The BOJ needs to carefully investigate the impact of tariffs on the economy. There is no way to complete this by the May meeting."

According to Nihon Keizai Shimbun (Nikkei), Japan's automobile exports to the U.S. last year amounted to 6 trillion yen (approximately 58.54 trillion won), accounting for 30% of total exports. Analysts suggest that imposing Trump's 25% tariff on automobiles, a core industry of the Japanese economy, could burden the entire industry. Goldman Sachs analysts expect that the automobile tariffs will reduce Japan's gross domestic product (GDP) growth rate by 0.1 percentage points.

This content was produced with the assistance of AI translation services.