According to the Bank for International Settlements (BIS), former President Trump’s trade policies could reignite inflationary pressures in the U.S. economy.
In the bank's annual report, BIS General Director Agustin Carstens analyzed how Trump's tariffs disrupted the economy, pointing out the high level of uncertainty during the enforcement phase. However, the situation stabilized somewhat during the 90-day suspension extension.
He explained, “We expect to have a soft landing — everything is going according to plan. Then, we went through a period of great volatility with the threat that tariffs will make achieving the 2% inflation target in some countries more difficult.”
### BIS warns that the global economy is vulnerable to disruptions
Carstens believes that the global economy is in a sensitive phase and countries are facing high levels of uncertainty. The BIS report warns that the potential for economic growth is slowing, with increasing risks to price stability, fiscal health, and the financial system as a whole.
He added that the global economy is particularly vulnerable to disruptions caused by climate change, geopolitical shifts, aging populations, and challenges in supply chains.
The report also shows that the surge in inflation after COVID-19 has affected perceptions of price volatility, while high public debt has not alleviated this pressure.
When Trump's tariffs were first imposed, the market saw a sharp drop and only partially recovered. The bank's report indicated a severe loss of investor confidence during that time, although lingering doubts persisted, the suspension of tariffs helped alleviate some uncertainty.
The USD has dropped about 10% in 2025 and could quickly become the largest decline in the first half of the year since the early 1970s, according to Hyun Song Shin, chief economic advisor of the BIS.
Shin emphasized that there are still no clear signs that investors are pulling out of the USD as some economists have predicted. He believes it is still too early to conclude, especially since sovereign funds and central banks tend to move slowly.
However, Shin also noted that Treasury bonds and U.S. assets may contribute to the recent decline of the USD.
### BIS recommends reducing trade and administrative barriers to boost growth
The BIS believes that inflation risks and instability are likely to arise or be exacerbated by tensions in the government bond market. The bank also warns that growing doubts about fiscal sustainability could complicate debt refinancing and affect inflation expectations.
Therefore, the BIS calls on governments to adopt more flexible labor policies, ease bureaucracy and trade barriers, increase public investment, while implementing fiscal repairs to boost growth and productivity.
However, officials also warned against loosening banking regulations too much, even suggesting enhancing oversight of non-bank financial institutions.
Central banks are advised to be cautious when balancing growth and inflation control as markets are very sensitive to price fluctuations. Deputy General Director Andrea Maechler also stressed that today’s price increases can no longer be seen as a temporary phenomenon but may be a sign of persistent inflation.
BIS officials also advised central banks to maintain their core mission to ensure customer trust and the effectiveness of policies. They warned of the growing interest in stablecoins.
Additionally, Carstens warned that the U.S. Federal Reserve (Fed) may face many difficulties, especially as Chairman Jerome Powell does not support interest rate cuts urged by the White House.
He believes that central banks may face “higher inflation pressure or skewed inflation expectations along with the slowdown in the economy.”
Source: https://tintucbitcoin.com/ngan-hang-trung-uong-toan-cau-canh-bao/
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