Richmond Fed's Barkin notes that tariff disruptions increase unpredictability and dampen hiring, expressing doubts about the need for additional rate reductions

Richmond Fed President Highlights Tariff Uncertainty

Tom Barkin, president of the Richmond Federal Reserve, noted on Wednesday that the ongoing changes to President Trump's tariffs—first overturned by the US Supreme Court and then reintroduced through alternative measures—are fueling uncertainty for both businesses and the broader economy.

“Companies continue to face significant uncertainty, which is contributing to slower hiring and a reluctance to invest,” Barkin explained in an interview with Yahoo Finance. “It’s difficult to predict what comes next, and I’m not seeing a surge in job creation.”

Supreme Court Ruling and Tariff Changes

Recently, the Supreme Court invalidated Trump’s “Liberation Day” tariffs, ruling that he lacked the legal authority to impose them under emergency economic powers. In response, the president quickly implemented a 10% tariff on imports worldwide and is now seeking to increase that rate to 15%, along with additional tariffs targeting specific industries.

Tariff Refunds and Economic Impact

Barkin anticipates that tariff refunds will eventually be distributed, which could help reduce prices. He views these tariffs as similar to a corporate tax cut, since importers bear the initial costs and any rebates will primarily benefit those involved in the supply chain.

“While some of the savings might reach consumers, the majority will likely benefit businesses along the supply chain,” he added.

Inflation Outlook and Consumer Sentiment

Beyond tariffs, Barkin expressed “cautious optimism” that inflation will continue to ease this year. He mentioned that many businesses he consults with are largely finished raising prices, as consumers have started to resist further increases.

“Consumers are simply worn out by higher prices and are no longer willing to accept them,” Barkin said. “I’m hopeful that inflation will decline, and I’m seeing signs of that in current market behaviors.”

Labor Market and Interest Rates

Barkin finds recent employment reports encouraging. He raised the question of whether the Federal Reserve should consider additional rate cuts to stimulate demand, given the slow pace of hiring. The Fed reduced interest rates three times late last year to support job growth.

“The labor market and demand have both remained relatively strong, but the question remains whether further rate adjustments are needed to boost demand,” he commented.

Will AI Transform White-Collar Employment?

Barkin responded cautiously to a new report from Citrini Research, which warns that artificial intelligence could lead to widespread layoffs among white-collar workers, potentially reducing consumer spending and triggering a recession.

AI’s Dual Impact on Jobs

While acknowledging that AI could disrupt the workforce, Barkin pointed to examples in programming and call center roles where AI adoption hasn’t led to job losses. He also noted that AI could generate new employment opportunities. Manufacturers struggling to find workers have told Barkin that AI could enable them to hire individuals who might not otherwise qualify for these positions.

“AI has the potential to create jobs as well as eliminate them,” Barkin said. “The real question is how the transition will unfold—how quickly it will happen and what the short-term impact on the labor market will be as workers shift from old roles to new ones.”