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3w ago

U.S. Faces Growing Stagflation Risks as New Tariffs Take Effect

Economists warn of stalled growth, persistent inflation, and rising unemployment, with Federal Reserve maintaining a cautious stance on interest rates.

U.S. President Donald Trump speaks in the Oval Office at the White House on March 28, 2025 in Washington, DC.
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Overview

  • Economists, including former Federal Reserve Vice Chairman Richard Clarida, warn of 'a whiff of stagflation' as the U.S. economy shows signs of slowing growth and persistent inflation.
  • President Trump's new tariffs, including a 25% blanket tariff on imports from countries buying Venezuelan oil, are set to take effect on April 2, heightening inflationary pressures.
  • The Federal Reserve raised its inflation projection for 2025 to 2.7% and lowered GDP growth forecasts to 1.7%, citing the impact of trade policies but opted not to adjust interest rates for now.
  • Unemployment rose slightly to 4.1% in February, while inflation eased to 2.8%, but concerns over long-term economic stability and recession risks continue to grow.
  • Economic uncertainty is at its highest level since 1985, excluding the pandemic, with Goldman Sachs increasing the probability of a U.S. recession in the next 12 months to 35%.