Greer says tariffs have zero rate impact as USMCA talks progress

U.S. Trade Representative Jamieson Greer said tariffs have no bearing on interest rates, pushing back against claims that trade levies fuel inflation.

U.S. Trade Representative Jamieson Greer said tariffs have no impact on interest rates, directly challenging the narrative that President Donald Trump's trade policy is fueling inflation and delaying Federal Reserve rate cuts.

"Tariffs have no impact on interest rates whatsoever," Greer said in an interview with Fox News, dismissing concerns that the administration's aggressive trade posture is contributing to higher borrowing costs for consumers and businesses.

The remarks come as the U.S. imposes 50 percent tariffs on Canadian goods under Section 338 of the Tariff Act of 1930 — a provision never before invoked by any president — and 10 percent to 12.5 percent duties on imports from more than 80 countries under a Section 301 forced labor investigation. The new levies collectively affect roughly 99.4 percent of U.S. imports, according to a USTR factsheet. Canada faces both the 50 percent Section 338 tariffs, effective Aug. 19, and a 10 percent rate under the forced labor probe, while Mexico and the U.K. also received the lower 10 percent rate.

Greer also confirmed that discussions with Mexico on the United States-Mexico-Canada Agreement have been "constructive," signaling a potential path to de-escalation. But with Canadian Prime Minister Mark Carney vowing to "respond tariff for tariff, dollar for dollar" — as Ontario Premier Doug Ford put it — the risk of a full-blown North American trade conflict remains elevated. The previous round of U.S. tariffs on Canadian steel and aluminum in 2018 triggered C$16.6 billion in retaliatory duties from Ottawa, a precedent that suggests any escalation will be met in kind.

Why the tariff-rate link matters for markets

The Federal Reserve has held the federal funds rate at 5.25 percent to 5.50 percent since July 2023, with Chair Jerome Powell repeatedly citing uncertainty around trade policy as a reason to move cautiously on rate cuts. OIS markets currently price a 62 percent probability of a hold at the September meeting, according to CME FedWatch data. If Greer is correct that tariffs are not inflationary, that could open the door for the Fed to cut sooner than markets expect. If he is wrong, and the 50 percent levy on Canadian goods pushes up consumer prices, the central bank may be forced to keep rates higher for longer — a scenario that would pressure equity valuations and strengthen the U.S. dollar.

Trading partners push back on forced labor claims

Reactions from affected nations have been swift. Australian Trade Minister Don Farrell called the tariffs "completely unjustified," while New Zealand Prime Minister Christopher Luxon said the U.S. investigation "did not provide meaningful evidence to support claims in relation to forced labor." Brazil, hit with a combined 37.5 percent tariff rate after a separate Section 301 probe, said the U.S. "chose to manipulate an issue of great importance to human rights." China reiterated its opposition to "all forms of unilateral tariffs," warning that "tariff wars and trade wars serve no one's interests."

The European Union, by contrast, offered a more measured response, noting that the Turnberry Agreement caps U.S. tariffs on most EU goods at 15 percent. Bank of France Governor Emmanuel Moulin said the new levies "ought not to change much" for Europe but acknowledged they "create more uncertainty for world trade."

This article is for informational purposes only and does not constitute investment advice.