Economists are increasingly alarmed that President Donald Trump’s economic policies which have come by way of steep tariffs and immigration curbs risk pushing the United States toward a self-inflicted stagflation crisis reminiscent of the 1970s.
The White House has brushed aside these concerns, even firing the head of the Bureau of Labor Statistics after a weak jobs report sent markets tumbling earlier this month.
Recent data has painted a mixed picture. Job growth has slowed sharply, with discouraged workers on the rise, prompting Moody’s economist Mark Zandi to warn the economy is “on the precipice of a recession.” Growth has also cooled, with GDP expanding at just 1.2% in the first half of the year, a full point below 2024’s pace.
Yet consumer spending has proven surprisingly resilient, climbing 0.5% in July and buoying markets, which quickly recovered from early August losses. Big banks, including JPMorgan, remain cautiously optimistic that household spending could carry the economy through turbulence, supported by tax cuts and a stock market rebound.
Inflation remains contained for now at 2.7% annually, but economists warn higher prices are looming as new tariffs kick in. Already, staples such as coffee and bananas are rising, and wholesale prices jumped at the fastest pace in three years in July.
Analysts caution that broad-based price pressures spanning both goods and services could soon confirm fears that stagflation is staging a comeback, leaving the Federal Reserve caught between weak growth and rising prices.
