Why stagflation now seems like America's "optimistic scenario"

Investors have gone into tariff shock, and stagflation could now be the optimistic scenario for the US economy.

Bull Market being destroyed by Recession concept
(Image credit: Getty Images)

“The post-World War II… world economic order” is finished, says Reshma Kapadia in Barron’s.

On Wednesday, 9 April, sweeping US import charges on most countries in the world came into effect, including tariffs of 20% on the EU and 104% in the case of China. As during the pandemic, ultra-efficient global supply chains are being disrupted, raising inflationary pressure. The latest tariffs, which Donald Trump unveiled on Wednesday 2 April in an event dubbed “Liberation Day”, take the average US tariff rate from 2.5% last year to 22% now, according to calculations by Fitch Ratings. That is the highest level since 1910.

Is the US headed for stagflation?

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Markets editor

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019. 

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere. 

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful. 

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.