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Federal Reserve officials have refrained from offering insights into how a potential second term for former President Donald Trump could affect the economy. The Fed takes pride in its apolitical stance and avoids any suggestion of involvement in political matters. However, closed-door transcripts of meetings during Trump's first term shed light on economists' sentiments regarding his economic agenda.

During the November 2020 US presidential election, Trump vowed to implement sweeping tariffs, ranging from 10% on all foreign imports to as high as 60% on certain Chinese products. He also proposed imposing levies of up to 100% on countries that abandon the US dollar as their reserve currency. These policies, if enacted, could have far-reaching repercussions for both the US and global economies.

To gain a better understanding of the potential consequences, US lawmakers sought the input of Federal Reserve Chair Jerome Powell, who heads the world's largest economy. However, Powell has consistently maintained his independence and declined to comment on political agendas. He emphasized during congressional hearings and press conferences that the Fed does not engage in trade policy discussions or take positions on fiscal policies.

While the Fed recognizes that policies enacted by elected officials undoubtedly impact the economy, Powell stressed that the central bank's role is to consider the effect of fiscal policies on interest rate decisions rather than evaluating the merits of those policies. Powell explained that deficit spending by Congress can stimulate the economy, but it falls outside the Fed's jurisdiction to assess or judge fiscal policy.

Nevertheless, the transcripts of past meetings, including the most recent one in December 2018, indicate that some Fed officials expressed legitimate concerns about Trump's trade policy and its potential impact on the economy. These transcripts, which are kept confidential for several years to ensure protection from political interference, revealed that officials grappled with incorporating Trump's proposed tariffs, tax cuts, and immigration controls into their forecasts for the economic outlook that influences monetary policy decisions.

During the December 2016 meeting, Loretta Mester, then-president of the Cleveland Fed, mentioned the negative effects of immigration and trade constraints on the US economy in the medium and long term. Other officials echoed similar sentiments in subsequent meetings as the Trump administration laid the groundwork for a potential trade war with China. At times, they expressed concerns that bordered on criticism of political agendas.

William Dudley, the former Vice Chair of the Fed, warned in a meeting in early 2017 about the potential consequences of the Trump administration's trade policies, suggesting they could lead to higher inflation and a greater likelihood of a hard landing for the economy. Mester also highlighted the potentially detrimental long-term effects of policy changes related to trade and immigration, including geopolitical risks arising from ill-conceived government policies.

It is worth noting that these discussions and assessments are routine for Fed officials, who must take a forward-looking approach when setting interest rates. However, they maintain that political considerations have no place in the Federal Open Market Committee (FOMC) meetings and that they strictly focus on economic factors.

As the Federal Reserve remains autonomous from political influences, its officials continue to closely monitor the potential economic impact of proposed policies, including Trump's tariff proposals. In their efforts to fulfill the Fed's mandate for stable prices and maximum employment, they aim to make informed decisions that safeguard the US economy's stability and growth.

The Federal Reserve declined to comment on the matter when approached by CNN for a response.

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