As the U.S. economy’s future takes the forefront with 2024 soon coming to an end, the Federal Reserve Bank of San Francisco’s president detailed what Trump's tariffs and rate decisions could mean for markets.
Speaking with FOX Business’ Edward Lawrence in an exclusive interview on Tuesday, Mary Daly directly answered what may happen if a 10% tariff on goods imported through the Port of Los Angeles is implemented.
"It really depends," Daly said in the live interview on "Cavuto: Coast to Coast." "This is why we don't, the Fed, does not think in hypotheticals, because the economy is a complex and large thing."
"It depends on what's tariffed, how it is, have firms in the U.S. adjust[ed] it? What are the other players in the global economy who might substitute their goods for goods that come in from another country?" Daly further posited. "So we've had trade issues and tariffs before, and the economy adjusts, and it doesn't usually derail growth."
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Last week, President-elect Donald Trump said he would issue an executive order upon taking office to charge Mexico and Canada a 25% tariff on all products coming into the U.S., as well as additional tariff hikes on China over the flow of illegal immigrants and illicit drugs.
In a subsequent Truth Social post, Trump added that he would institute an additional 10% tariff on all Chinese goods being imported into the U.S. over the "massive amounts" of drugs, in particular fentanyl, being smuggled into the country.
Daly clarified that the Fed does not have a tariff forecast model in place, as it falls under the category of "hypothetical."
"We know historically how tariffs impact the economy. There's a lot of work there. So we're very prepared to assess things. But, the president-elect hasn't even come into office yet," the San Fran president said.
"And I think it's only the right thing to give him and his team a chance to put the policies forward before we react."
When it comes to the macroeconomy, Daly expressed the central bank’s belief that it’s "in a really good place," although a December rate cut is not completely off the table.
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"In order to keep the economy in a good place, we have to continue to recalibrate policy," Daly noted.
"Now, whether it'll be in December or sometime later, that's a question we'll have a chance to debate and discuss in our next meeting. But the point is, we have to keep policy moving down to accommodate the economy because we want a durable expansion with low inflation."
FOX Business’ Breck Dumas contributed to this report.
