Economic concerns have shifted from inflation to stagflation as Trump’s tariffs begin to impact the economy. This dangerous combination of slowing growth and persistent inflation is appearing in economic data showing weaker hiring and manufacturing slowdowns.
The Federal Reserve faces a difficult dilemma – cut rates to boost growth but risk worsening inflation, or maintain rates to fight inflation while potentially harming employment.
Trump has acknowledged there may be “a little disturbance” as he pursues his trade agenda, while economists warn that “a trade war, by definition, is a stagflation shock.”