Trump’s Tariff Flip-Flops Revive ‘Stagflation’ Fears

President Donald Trump’s repeatedly delayed tariffs against major trading partners are prompting some economists to see a growing risk of a slowdown even as the cost of living continues to rise.

Trump roiled into financial markets this week when he first imposed heavy tariffs on Canada, Mexico, and China, then delayed the full brunt of those tariffs from taking effect until April 2. Some economists see a growing possibility of a swift recession combined with high inflation should Trump fully bring the tariff hammer down. In the meantime, the uncertainty about future trade policy has its own drag on the economy.

Tariffs could slow down economic growth while raising the cost of living at a time when the economy was already showing some signs of fatigue. Some experts see a growing risk of stagnant economic growth combined with high inflation called “stagflation.” Stagflation is a one-two punch because prices go up at the same time jobs and pay raises are getting harder to come by.

Brendan McKenna and Azhar Iqbal, economists at Wells Fargo Securities, said there was a risk of the U.S. economy entering a recession as soon as the second quarter of 2025 if Trump goes through with his proposed tariffs without calling them off or watering them down yet again, and the targeted countries retaliate with equal-sized tariffs to match. The recession would go hand-in-hand with a sharp increase in inflation, as the economists project the Consumer Price Index would rise 0.7 percentage points faster over the year.

“Tariff-induced inflation amid slower growth could bring the economy dangerously close to stagflation,” Jeffrey Roach, chief economist for LPL Financial, said in a commentary.

The tariff drama comes at a precarious time for the economy, which has already started to flash a few warning signs about a possible recession ahead. Consumer confidence and spending have both fallen in recent weeks, and an early projection of the Gross Domestic Product shows economic output is on track to shrink in the first quarter for the first time since 2021.

“Amid signs of consumer weakness and with tariffs just now taking effect, we are officially on recession watch,” Ryan Swift, U.S. bond strategist at BCA Research, wrote in a commentary. “The February retail sales report will be a particularly important signal of U.S. consumer health. Stay tuned.”