That, of course, was before President-elect Donald Trump won the election. Now, Americans may have to actually brace for stagflation — something the nation’s economy hasn’t experienced in over half a century. This time around, though, fueled by tariffs.
Just over a month from now, Trump will have the power to levy tariffs on other nations at the flick of a pen. And once inaugurated on January 20, he has pledged to immediately impose a 25% tariff on Mexican and Canadian imports and increase tariffs on Chinese goods by an additional 10%.
On the campaign trail, he also promised to levy a 10% to 20% tax on all imports and increase tariffs on Chinese goods by at least 60%.
There are some doubts as to whether Trump will follow through with these plans and, instead, use them as a means to negotiate with other nations. However, if these significant, broad-based tariffs go into effect, it could send the US economy back to one of the most painful periods that took over a decade to resolve.
The US economy is miles away from stagflation right now
“I was around for stagflation. It was 10% unemployment. It was high single-digits inflation and very slow growth,” Powell said back in May, referring to when oil prices spiked during the Arab oil embargo in the 1970s.Jamie Dimon, head of America’s largest bank, JPMorgan Chase — and commonly referred to as the ‘president of Wall Street’ — spent much of this past year warning that there’s an elevated risk that the US experiences 1970s-esque stagflation, which is when economic growth stagnates while inflation heats up.
“I look at the amount of fiscal and monetary stimulus that has taken place over the last five years — it has been so extraordinary; how can you tell me it won’t lead to stagflation?” Dimon said at a conference in May.
His prediction, however, has been pooh-poohed by many leading economic voices; chief among them was Federal Reserve Chair Jerome Powell, who said at a press conference in May, “I don’t see the stag or the ‘flation.”
