Kathleen Talks with Sebnem Kalemli-Ozcan

In this episode of Central Bank Central, Kathleen Hays interviews Sebnem Kalemli-Ozcan, Professor of Economics at Brown University and Director of the Global Linkages Lab, at the annual meeting of the American Economic Association. Kalemli-Ozcan addresses the surprising resilience of the U.S. economy despite tariffs, noting that the effective rates settled significantly lower than the extreme rhetoric initially predicted [02:21]. Kalemli-Ozcan explains that the lack of global retaliation stems from a mix of political dependence on U.S. protection and economic strategies involving currency depreciation [04:15].

Kalemli-Ozcan also warns that tariffs can create a "high cost environment," which discourages manufacturing jobs by raising the cost of imported inputs such as steel and glass [06:26]. Her model predicts that a persistent 10–15% tariffs will eventually force the Federal Reserve to halt rate cuts and resume fighting "sticky" inflation [12:28]. Furthermore, she highlights that the dollar’s depreciation in early 2025 was driven by policy uncertainty, as markets and households reacted to volatile trade rhetoric [15:28].

Looking forward to 2026, she anticipates the Global Linkages Lab will dive deeper into micro-data in order to track how supply chains and financing are being rewired globally [18:45].

For more on Kathleen Hays:
https://kathleenhays.substack.com/
https://x.com/Kathleen_Hays

For more on Kalemli-Ozcan:
https://sebnemkalemliozcan.com/
On X: https://x.com/skalemliozcan?lang=en

#economy #tariffs #federalreserve #inflation #substack