President Donald Trump’s aggressive new tariffs are igniting trade wars not only with Canada, Mexico and Mainland China, but also, with longtime allies in the European Union (EU). And the tariffs are setting off instability in the stock market, with the Dow Jones Industrial Average taking some major plunges in mid-March.
Washington Post columnist Catherine Rampell examined the state of the U.S. economy during a Monday morning, March 17 appearance on MSNBC — and noted fears of possible “stagflation.”
Rampell, now a weekend host on MSNBC, outlined the concerns expressed by the Organization for Economic Co-operation and Development (OECD) in a recent forecast.
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Rampell told fellow MSNBC host Ana Cabrera, “Relative to just three months ago, they have ratcheted down their forecasts for economic growth and ratcheted up their forecasts for inflation, both in the U.S. and around the world. And so basically, they blame that primarily on rising uncertainty and Trump’s trade wars.”
When Cabrera asked Rampell, “How bad could it get?,” the Post columnist responded, “Well, the numbers so far don’t indicate, let’s say, a recession. But they do warn that if things escalate — if these trade wars escalate — we will see a…. huge impact on growth and on consumer prices. So, just as an example: a few months ago, right before Trump took office, the OECD was predicting that inflation would fall this year in the United States relative to last year. They’re no longer predicting that; they are predicting that inflation will speed up this year in the United States relative to last year.”
Rampell added, “Much of the rest of the world, they’re also seeing, you know, some increase in consumer prices, but not like what we are expected to see here.”
The “general impact” of Trump’s trade war, Rampell told Cabrera, “is quite bad” for “the U.S. economy and the global economy.”
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Rampell noted, “I think this is the first evidence we have — the first official forecast, anyway, that we have — that Trump’s trade wars are already dragging on the global economy…. On the one hand, the tariff hikes are likely to raise prices. On the other hand, they’re likely to slow growth. And one of those outcomes would nudge the Fed to raise rates, and one of them would nudge the Fed to cut rates. And so, they’re kind of stuck in this difficult position of potential stagflation. People who remember the ’70s remember that potential outcome. “
Economists used the term “stagflation” to describe a painful combination of high inflation, stagnant economic growth, and rising unemployment. Stagflation was a major problem in the United States in the late 1970s and early 1980s and was a factor in Ronald Reagan’s landslide victory over President Jimmy Carter in the 1980 election.
However, Reagan, during his first term, was dogged by economic woes as well, which led to Democrats’ blue wave in the 1982 midterms.
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