US Tariffs: Powell Tilts Toward Jobs, Tariffs Cloud Outlook for India

Powell’s Balancing Act: What His Jackson Hole Speech Means for India
When US Federal Reserve chair Jay Powell took the stage at Jackson Hole this week, global markets held their breath. Everyone wanted to know: would he focus more on inflation or on jobs?

Powell’s answer was careful, measured, but telling. He acknowledged that the US economy is still resilient, yet risks are shifting. Inflation — partly fueled by President Donald Trump’s tariffs — remains above comfort levels. At the same time, the job market is showing signs of weakness.

America’s Crossroads
The Fed chief described the US as being in an unusual situation. Inflation has cooled from pandemic highs but remains sticky, while employment is balanced only because both demand and supply have declined. “That’s a risky mix,” Powell admitted.

Tariffs are making goods costlier, and their full impact will be felt in the coming months. Still, Powell suggested this inflation bump may be “relatively short-lived.” What worried him more was employment. If jobs weaken further, the economy could lose steam quickly.

That’s why Powell left the door open to lower interest rates. In simple terms, cheaper borrowing costs could help households and businesses spend more, cushioning the blow from tariffs.

Markets cheered instantly. US bond yields fell sharply, the S&P 500 jumped 1.6%, and the Nasdaq surged 2%.

Ripples for India
For India, Powell’s message is a double-edged sword.

On the positive side, if US rates fall, global investors may look for better returns elsewhere — and Indian equities and bonds could benefit. The probability of a US rate cut in September is now seen at 90%, according to CME data.

But the negative overhang remains tariffs. India faces a fresh 25% duty on exports to the US starting August 27, adding to uncertainty for companies and markets. Even the recent S&P sovereign rating upgrade failed to spark enthusiasm in the bond market, showing how deeply tariff risks weigh on sentiment.

India’s Countermove
The Indian government is betting on a domestic push. GST rates are being rationalised to lower costs for consumers, with the hope that cheaper goods will spark stronger demand during the festival season.

If spending picks up, it could offset some of the tariff pain and support corporate earnings growth in the second half of the year. But the risk is that consumers delay purchases now in anticipation of lower prices later — which could hurt sales in the short term.

The Big Picture
In America, Powell seems ready to prioritise jobs over inflation. In India, the government is counting on GST reforms to keep growth on track. Both are acts of balance, with no guaranteed outcomes.

For now, markets have taken comfort in Powell’s softer stance. But the real test lies ahead — whether policy support in both Washington and New Delhi can withstand the pressures of tariffs and global uncertainty.

Bottom line: Powell has given global markets hope with the prospect of lower rates. For India, that could mean fresh inflows of foreign capital. But tariffs remain a stubborn thorn — and it will take smart fiscal maneuvering at home to keep the growth story alive.

[Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the editorial stance of this publication.]