U.S. Federal Reserve Chair Jerome Powell testifies before the Senate Committee on Banking, Housing, and Urban Affairs, on Capitol Hill on June 25, 2025 in Washington, DC, U.S.
Kent Nishimura | Getty Images News | Getty Images
It’s the what-could-have-beens that hurt the most. The childhood sweetheart who moved to a different country. The early opportunity to invest in a company designing graphics chips for games. The lower interest rates if not for tariffs.
On Tuesday, U.S. Federal Reserve Chair Jerome Powell confirmed that tariffs — and, specifically, their unexpectedly large “size” — are the chief reason the central bank hasn’t lowered rates this year since it last cut them in December.
Imagine that. We could have been living in a world where the fed funds rate is at a range of 4% to 4.25%. If inflation was staying obediently below the Fed’s 2% goal, the range could even be 3.75% to 4%, given that the central bank in June kept last year’s projection of two rate cuts in 2025.
The thought stings. But it might help to think that if U.S. President Donald Trump hadn’t slapped tariffs on partners and penguins, his other policies could have similarly pushed inflation forecasts higher.
Remember how all three major U.S. indexes surged and hit new records on Trump’s election victory because Wall Street was anticipating tax cuts and looser corporate regulation. Without the dampening effect of tariffs, economic optimism might have spilled over into exuberance and higher inflation.
Better to play the cards we were dealt with than to lapse into imagined futures.
What you need to know today
Tariffs are keeping U.S. interest rates high. Federal Reserve Chair Jerome Powell said Tuesday the central bank would have lowered rates this year if not for Trump’s tariffs, which caused inflation forecasts to go up “materially.”
The S&P 500 dips from record. On Tuesday, the index slipped 0.11%. Tesla shares tumbled after Trump suggested DOGE take a look at the company’s subsidies. Asia-Pacific markets mostly fell Wednesday, but Singapore stocks hit a record high.
XPeng maintains steady sales in June. The electric car startup delivered 34,611 cars, the eighth straight month of breaking the 30,000 level. BYD remained the market leader, delivering more than 10 times the number of vehicles XPeng did.
Trump’s megabill squeaks through the Senate. Vice President JD Vance cast a final, tie-breaking vote that sends the bill back to the U.S. House for approval. While the bill would increase the deficit, some banks think it’ll give the U.S. economy a shot in the arm.
[PRO] Hedge funds are betting against the Swiss franc. The move is part of a “carry trade,” a strategy in which investors borrow in a currency with a lower interest rate — the franc, in this case — to buy a currency with a higher rate and pocket the difference.
And finally…
Israeli army soldiers ride in the turret of a Merkava battle tank.
Jack Guez | AFP | Getty Images