President Donald Trump’s sweeping new tariffs on US trade partners have raised concerns among economists about the potential for stagflation. The term “stagflation” describes a period of high prices and low GDP growth, which was seen in the 1970s economic doldrums.
While the US economy remains relatively strong, with inflation below its post-pandemic spike, fresh tariffs are fueling fears that higher prices could be on the horizon. The effective average tariff rate now stands at 18%, the highest since 1934, according to an analysis from the Yale Budget Lab.
Economists warn that if businesses pass on the costs of new import duties to consumers, inflation could rise. The latest round of import duties marked a reversal of earlier downward trends, pushing the inflation rate farther away from the Federal Reserve’s goal of reaching a 2% annual rate.
The economy is also facing another hit from tariffs if some US businesses scale back hiring or expansion plans due to higher costs. Last week’s disappointing employment report suggested the US job market is starting to wobble under uncertainty over on-again, off-again tariffs.
The White House has dismissed concerns about stagflation as “panican paranoia,” but economists say the situation is more complex. The US economy faces a challenging scenario with a weaker job market and higher inflation, described by one expert as “stagflation lite.”
Source: https://www.cbsnews.com/news/trump-tariffs-inflation-gdp-stagflation-concerns