Forbes Media’s Steve Forbes joins “The Big Money Show” to speak concerning the worldwide implications of rising commerce tensions between the U.S. and China.
Financial uncertainty introduced on by President Donald Trump’s tariffs on U.S. buying and selling companions is elevating issues that the financial system may face stagflation if situations persist.
Stagflation is a time period used usually to explain a situation wherein financial progress is stagnant whereas it is also experiencing excessive inflation, inflicting client costs to rise and doubtlessly contributing to a weak labor market and, finally, larger unemployment.
Tariffs are taxes on imported items, that are paid by importers who sometimes cross some or all the larger prices they face on to customers via larger costs, is a dynamic that has raised issues a couple of resurgence of inflation. Customers’ inflation expectations have risen in current months in surveys by the Federal Reserve forward of tariff-induced worth hikes being tacked on to many client items.
Latest financial knowledge has added to issues concerning the potential onset of stagflation. Information launched final week by the Commerce Division confirmed that U.S. gross home product (GDP) contracted at an annual fee of 0.3% within the first quarter of 2025. That marked the primary quarterly contraction within the U.S. financial system because the first quarter of 2022.
US ECONOMY SLOWS SHARPLY, SHRINKING 0.3% IN THE FIRST QUARTER AS TARIFFS WEIGH
Uncertainty and financial dislocation attributable to tariffs may result in stagflation within the U.S. financial system. (Spencer Platt/Getty Photographs)
Ellen Zentner, chief financial strategist for Morgan Stanley Wealth Administration, stated of the report final Wednesday, “Even if today’s weak GDP may have partially reflected companies trying to get ahead of tariffs, it was still a stagflation warning shot over the bow of the economy. This type of data won’t soothe the markets, and it won’t make the Fed’s job any easier.”
David Bahnsen, managing accomplice and chief funding officer of wealth administration agency the Bahnsen Group, informed FOX Enterprise in an interview {that a} stagflationary atmosphere would pose a problem to the Federal Reserve because the central financial institution seems to stability its twin mandate of fostering secure costs and most employment.
US TRADE DEFICIT HITS RECORD HIGH IN MARCH
Stagflation would pose a problem for the Federal Reserve and Chair Jerome Powell because the central financial institution balances its twin mandate. (Alex Wong/Getty Photographs)
“There’s almost nothing the central bank can do about stagflation because, in that case, the reason for higher prices is not monetary,” Bahnsen defined. “It would not be because there’s too much money chasing too few goods, it would be because there is an extrinsic upward pressure on prices as a result of tariff policy and new input driving prices higher that’s totally outside the domain of the central bank.”
Bahnsen went on to say that whereas he expects the Trump administration will pull again the majority of its tariffs sooner or later, permitting worth hikes to be unwound, the uncertainty surrounding the period and extent of the tariff coverage may trigger an financial slowdown as companies pull again funding as they anticipate higher readability.
“I don’t believe that the price increases are going to be permanent, mostly because I think the Trump administration is going to end up doing a big walk-back on most of the tariffs that they’ve been threatening,” he stated. “I believe that the far bigger issue is the stagnation, which is, what is the slowdown in economic growth going to be because of the policies?”
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“That’s my bigger concern, but I don’t really have the ability to answer it. I don’t really have the ability to game out how it’s going to go, because I don’t know if he’s going to pull back all the tariffs tomorrow,” Bahnsen stated. “The magnitude of the economic impact and the length of the economic impact are all really directly correlated to how long a lot of this uncertainty goes on, and we just don’t have clarity on that right now.”
