Financial experts are expressing mounting concerns over President Donald Trump’s imposition of tariffs on imported goods, fearing the potential emergence of “stagflation” in the economy. Trump’s recent actions, including raising import prices by implementing tariffs on goods from Mexico, Canada, and China, have sparked apprehension among consumers, business leaders, and policymakers. The move comes amidst a slowdown in economic activity and escalating costs, prompting worries that the tariffs could have more significant repercussions beyond increasing consumer goods prices.

Stagflation, a condition characterized by slow growth and high inflation, has not been observed in the U.S. since the 1970s and early ’80s. The term lacks a formal definition but is typically associated with high unemployment and a weakened economy coinciding with rising prices. Factors that can contribute to stagflation include spikes in raw material costs, such as the oil embargo in the 1970s that led to persistent inflation and unemployment above 5%.

Current economic indicators reflect a challenging landscape, with a recent report showing a significant slowdown in job creation and a contraction in economic activity for the first quarter. Concerns about policy uncertainty, consumer spending hesitancy, and impacts on corporate profits due to tariffs have further exacerbated the situation. The Federal Reserve faces a dilemma in addressing stagflation, as typical measures to combat inflation, such as raising interest rates, could further dampen economic growth. The potential repercussions of a stagflation scenario underscore the complexity and challenges in managing the current economic landscape.