• A poor day for stocks ended worse as tariff fears reentered the conversation, with major indexes sliding as tech companies report the first impacts from the U.S.’ trade war with China.

Stock markets started the day poorly and ended it worse as chipmakers reported revenue impacts from the China trade war and a hawkish speech from Federal Reserve Chair Jerome Powell reignited fears of tariffs’ stagflationary effects.

The S&P 500 lost 2.2%, led by a selloff in tech. The Dow lost 1.7% while the tech-heavy Nasdaq fell 3.1%.

Nvidia closed down 7% after the chipmaker revealed Donald Trump’s restrictions would cost the chipmaker $5.5 billion. The policy means the trillion-dollar company can no longer export a key chip to China—a market analysts estimate makes up 10% of its revenue. Rival Advanced Micro Devices sank 7% also after noting that those export limits could hit the chipmaker up to $800 million.

The existing uncertainty over trade policies was made starker by a speech from Federal Reserve Chair Jerome Powell Wednesday afternoon, who warned that tariffs would create a “challenging scenario” for the Fed of “higher inflation and slower growth,” a recipe for stagflation.

“There isn’t a modern experience of how to think about” the White House’s trade policy, Powell said in a speech to the Economic Club of Chicago.

Bond yields eased on Powell’s comments, indicating investors’ pessimism over the possibility of a U.S. recession. The yield on the 10-year Treasury note fell to 4.27% late in the day, from 4.35% in the morning and 4.48% last week, when bond markets experienced a trade-war-driven meltdown.

“Markets are struggling with a lot of uncertainty, and that means volatility,” Powell added.

The dollar gained ground against the euro Wednesday but has lost about 6% of its value in the past month as investors rethink the currency’s status as a safe haven. Gold hovered near its record high at $3,352 per troy ounce.

Earlier in the day, retail sales figures showed many consumers rushed to buy cars, electronics, and other big-ticket items last month before tariffs could hike prices further.

So far, the U.S. has a baseline tariff on most countries of 10%, with a 145% combined tariff on China. Goods from Canada and Mexico face tariffs of up to 25%, while imported autos, steel, and aluminum are taxed at that same rate. China retaliated last week by imposing a 125% tariff on U.S. goods. Tariffs are expected to drive consumer prices higher, and have contributed to plunging consumer sentiment for the fourth month in a row.

This story was originally featured on Fortune.com

• Inflation could rise and growth could slow as a result of President Donald Trump’s tariff policies, according to Federal Reserve chair Jerome Powell. During a speech on Wednesday, Powell said the Fed’s top goal was keeping price increases from Trump’s tariffs limited to a one-time event, so inflation doesn’t linger. 

Federal Reserve chair Jerome Powell sounded his strongest warning to date about the impact of President Donald Trump’s on-again, off-again tariffs.

“The level of tariff increases announced so far is significantly larger than anticipated, and the same is likely to be true of the economic effects, which will include higher inflation and slower growth,” Powell said on Wednesday during a speech at the Economic Club of Chicago. 

Tariffs would raise inflation and slow growth, Powell said, reiterating a point he made earlier this month. They have also weighed heavily on expectations businesses and consumers had about the economy.

“Surveys of households and businesses report a sharp decline in sentiment and elevated uncertainty about the outlook, largely reflecting trade policy concerns,” Powelll said. 

The economy now faced “heightened downside risks,” Powell added—a stark acknowledgement of a possible economic downturn for the usually circumspect role of Federal Reserve chair. 

In the time since Powell’s latest comments earlier this month, the White House retracted and then reenacted numerous parts of its original widespread tariff policy. Most notably, Trump paused the tariffs announced on April 2 for every country except China, which was hit with additional levies. His administration then granted exemptions to certain products like smartphones and semiconductors, until Trump personally intervened to reverse course on those exemptions. The constant back and forth created a backdrop of uncertainty for businesses and investors, many of whom were still reeling from the market crash Trump’s tariffs caused. 

Powell saw it as “highly likely” tariffs would raise prices, but the key question the Fed was still evaluating is how long they would last. 

“Our obligation is to keep longer term inflation expectations well anchored and to make certain that a one time increase in the price level does not become an ongoing inflation problem,” he said. 

One of the key metrics the Fed watches in its assessments of the economy are long-term inflation expectations. If those rise, it means business leaders, investors, and the public at large see inflation as a chronic problem that won’t go away. When that happens, they’re much more likely to cut back on spending, which only raises the likelihood of a recession. 

The latest CPI report from March measured inflation at 2.4%, slightly lower than expected. However, that read came before Trump implemented his tariff policy. 

Since Powell last spoke, the economic turmoil of Trump’s tariffs made its way from the stock market to the bond market. Yields on 10-year and 30-year Treasuries soared at the same time as U.S. and global stocks were cratering. That gave the indication that scared investors were pulling their money out of stocks, and rather than parking it in U.S. bonds, considered the safest investments in the world, were actually selling those assets as well. Those dynamics signaled an unprecedented lack of faith in the U.S. economy. 

“There isn’t a modern experience of how to think about this,” Powell said of the recently implemented tariff policy. 

The moves in the bond market were unusual, according to Powell, who urged caution about jumping to conclusions about what caused them. 

“It’s the markets processing historically unique developments and with great uncertainty,” Powell said. “I think you’ll probably see continued volatility, but I wouldn’t try to be definitive about exactly what’s causing that.”

As is customary, Powell did not tip his hand about upcoming monetary policy moves or when they would happen. Instead, Powell said that the relative strength of the U.S. economy had bought the Fed time before needing to make a decision. 

“For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance,” he said. 

Trump’s tariffs are almost certain to raise prices for businesses and consumers, which would hamper the Fed’s yearslong efforts to bring down inflation. In that scenario, rate hikes might be warranted. However, that would be a reversal from the rate-cutting cycle the Fed has been in since September. At the same time, rate cuts would be warranted if the U.S. economy enters a recession. The worst-case scenario is stagflation, which is when inflation is high but the economy doesn’t grow. Powell defined that particular scenario as a “challenging” one in which the Fed’s dual mandate goals of full employment and stable prices would be “in tension.” 

“It’s a difficult place for central banks to be in,” Powell said. 

In short, the range of outcomes for what the Fed might, or should do, is only widening. 

The market is currently pricing in between two and three rate cuts in 2025 starting in the second half of the year. But those plans could be subject to change given how volatile things are across the economy.

“Markets are struggling with a lot of uncertainty, and that means volatility,” Powell said.

This story was originally featured on Fortune.com

Tariffs have suddenly become a massively disruptive feature of the U.S. economic landscape, upending supply chains and threatening consumers with a new wave of inflation. But even as tariffs have come to dominate headlines, most people would struggle to explain how exactly they work in practice. How exactly do U.S. businesses keep track of them? How do firms know how much they owe? The answer is that the process is not easy and requires companies to know their way around an 18-pound book with thousands of rules—while also posting bonds upwards of $50,000 and using special software.

To get an idea of how collecting tariffs works in practice, Fortune spoke with customs brokers and legal experts to learn just what happens after the White House announces a new tariff. Here is a basic overview of the process.

How does a U.S. firm know when it has to pay a tariff?

Tariffs only apply to imports from other countries. This means all goods that arrive at U.S. ports, land border crossings or airports are subject to a potential fee when they enter the country.

Until this year, tariffs didn’t apply to numerous countries—including Australia, Israel and Costa Rica—because they enjoyed free trade deals. Now, under President Donald Trump, they apply to every country, though some goods from Canada and Mexico are still exempt.

How does a firm know how much to pay?

It depends both of the good in question and the country it comes from. People in the import business rely on an 18-pound book that lists all of this based on an international classification system known as the Harmonized Tariff Schedule.

This information can also be found on the U.S. government website https://hts.usitc.gov/, including a list of mostly 10 digit codes that serve as shorthand. They are not always easy to decipher. Gretchen Blough, a manager at customs broker Logistics Plus says, for example, that computers are classified as “automatic processing machines.”

Businesses then use those codes to report what they are importing to U.S. Customs and Border Protection, using a software system called “Automated Commercial Environment” (ACE).

What if the tariffed goods are made of different stuff?

This is where it gets tricky. If a good is assembled with parts from all over, Customs will typically apply a single tariff based on the place that supplied its “essential character.” For instance, in 2022, the agency said a fish smoker with components from five countries should receive the tariff assigned to Turkey, which supplied a wooden rack that gave it that essential character.

But some goods may be subject to more than one tariff. That’s the case if there is a special material—such as steel—that has been singled out for a special rate.

How do firms keep up when the tariff rules keep changing?

It’s not easy. In the past, a U.S. trade official would announce a tariff change, and it would go into effect when published on the official Federal Register, along with a fact sheet on the Commerce Department website. More recently, the process has been more haphazard as President Trump has been implementing changes via Executive Order.

According to Blough, Trump’s unpredictable announcements have forced importers to scour the White House website or even rely on news reports to try and figure out what tariff rates apply on a given day.

How is a small business supposed to do all that?

Most of the time they don’t. Instead, they rely on dedicated customs brokers like Logistics Plus or Livingston—UPS and FedEx also offer this service—to handle the tracking and paperwork in exchange for a fee. Some businesses may do this in-house but most rely on these third party services, which do not have a hands-on role when it comes to the goods.

“The broker will never see the goods, especially in this day and age. In the old days, someone would sit at the border and meet drivers and file for them,” says Jill Hurley, a senior director at Livingston, adding that the broker typically lets Customs know in advance, and ensures the goods are released to a trucker.

What was that about posting a bond?

Companies that import on a regular basis will have a standing account from which Customs draws the tariff payments, typically 10 days after the goods are released. This arrangement makes the process go more smoothly but, to use it, a company will have to post a bond in case there is not enough money in their account.

The minimum bond is $50,000 but many firms will have to post much more since the amount is based on 10% of the duties they paid in the last 12 months. For firms that are importing major commodity shipments, including oil and gas, the bond could be in the millions of dollars. Companies, though, typically don’t post all that collateral themselves—instead they pay a fee to a third party surety service to do it for them.

What happens if a company gets the tariff wrong?

If Customs discovers that a firm or its custom broker gets the tariff rate wrong—the agency has up to 300 days to review a given transaction—it will ask the company to pay any shortfall. And if the agency concludes the mistake is deliberate, it may impose a series of penalties.

This story was originally featured on Fortune.com