US stagflation concerns spike ahead of Trump’s tariff announcement

Stagflation, a scenario that combines flagging economic growth, stubborn inflation and rising unemployment, is currently a hot topic in financial markets. Concerns about a potential US stagflation has spiked ahead of new tariffs that President Donald Trump plans to impose as early as April 2, Yahoo Finance reports.

Ed Yardeni, president of Yardeni Research, notes that while the US economy has shown resilience over the past three years of tight monetary policy, recent data reveals troubling signs. The analyst points to weakening manufacturing activity and persistent consumer price growth as key concerns, prompting him to raise his probability for the US entering a stagflation period from 35% to 45%.

Meanwhile, Federal Reserve officials believe that any inflation spike from Trump's tariffs will prove transitory. The central bank's latest projections suggest the PCE price index climbing to 2.7% in 2025 before easing back to the 2% target by 2027. However, many economists argue the Fed is underestimating the extent to which tariffs are likely to trigger inflation.