Reporter: Are you worried about stagflation?
— Acyn (@Acyn) March 31, 2025
Trump: I haven’t heard that term in years. I don’t know anything about it.. this country is going to boom. We’re going to have boomtown. We’re going to boom pic.twitter.com/Ajo5RUOoaa
I don’t think it’s going to be a boom. It’s going to go boom. Like a bomb. A big one.
Trump is so addled that he’s out of the loop on anything that’s actually happening in the world. So he probably hasn’t heard about this:
Economic growth has flatlined so far this year. Inflation has picked up. And consumers expect both to get worse in the months ahead.
Why it matters: For the moment, it adds up to Wall Street’s least-favorite “s-word,” stagflation — stagnant growth mixed with elevated inflation.
- That pattern, most vividly seen in the 1970s, is particularly painful because it means people experience pain from both lack of job opportunities and higher prices.
- It also leaves the Fed and other economic policymakers with less ability to cushion the blow because a move that might address one side of the problem could worsen the other.
The big picture: The takeaway, from a slew of recent data, is that President Trump inherited a shakier economy than it seemed and is risking something worse with aggressive policy moves.
State of play: The backward-looking data lately has been distinctly stagflationary. Consumer spending in the first two months of 2025 has been soft, coming in 0.6% below its December rate (when adjusted for inflation).
- A real-time estimate of GDP published by the Atlanta Fed is now pointing to economic activity shrinking at an 0.5% rate in Q1, which ends Monday (after adjusting for gold inflows that distort economic data).
- Meanwhile, the inflation measure favored by the Fed has risen at a 4.1% annual rate in the first two months of 2025, the highest in a year.
- That all helps explain why, following a steep selloff Friday, the S&P 500 is now 9% below its Feb. 19 high.
Reality check: The GDP number appears to be depressed by a one-time surge of imports as companies try to get ahead of tariffs. Inflation has been on a bumpy path for years
Gosh I wonder what happened about four months ago that collapsed the American economic trajectory? I can’t think of anything.
Trump truly believes that the tariffs are going to change everything “and it’ll happen so fast it’ll make our heads spin.” He’s right. But not in a good way. His nutty “adviser” who’s feeding his fantasy says that the tariffs are going to raise 6 trillion for the government, replacing something like a third of the budget. If that’s true then most of that 6 trillion is going to be borne by American consumers making it the biggest tax hike in world history.