by With inflation low, unemployment steady, and U.S. stock markets returning to all-time highs, President Trump has had no incentive to back down from his goals for a global trade war.
However, the most recent escalation, which includes duties of 30 percent on the European Union, may deal the United States a far more devastating blow. The kind of destruction to firms and consumers that economists have long feared and that Mr. Trump has largely avoided may be unleashed if the tariffs take effect on August 1. The threat of a stagflationary shock, in which inflation increases as growth pauses, is the source of their anxiety.
According to Eric Winograd, an economist at the investment firm AllianceBernstein, stagflation will worsen the higher the tariffs wind up becoming.
Given that the European Union and the United States are each other’s biggest trading partners, the tariffs that are now being imposed against the group run the potential of producing even more severe disruptions to the economy, which has already been affected by them in a variety of ways.
In a statement, European Commission President Ursula von der Leyen said that Mr. Trump’s recent tariffs will disrupt vital transatlantic supply networks, harming companies, customers, and patients on both sides of the Atlantic.
Businesses have so far been able to lessen the effects of Mr. Trump’s taxes. They stacked up goods early this year to avoid the tariffs, which led to a spike in imports before they fell off. Because businesses have been unable to operate due to uncertainty surrounding Mr. Trump’s intentions, Americans’ confidence in the economy has decreased.
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