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The US economy exceeds the turbulence area. There is a long resurface of the spectrum: stagflation between increased inflation and significant growth slowdown. This phenomenon, which combines economic stagnation and increases in prices, reminds of the 70s, years, new price policies Donald Trump are afraid of returning at the time when growth was stopped and eroded at high speed when buying energy. The decision of the US President to impose heavy taxes on Chinese, Mexican and Canadian imports raises many questions about his real impact on the economy. While the federal reserve system is pushed in its entores, markets are vaccinated and societies are afraid of their profitability.
Trump Price: Risky Bet on the American Economy
Trump’s administration decided to tighten the tone of imports, and the increase in the customs rates hit several major business partners. Indeed, the President announced a 25 % increase in products from Mexico and Canada, as well as doubling duties on Chinese imports, now has increased to 20 %. “In the end, we will restore business balance and protect our national industry,” he said at a press conference at the White House.
But in the field the impact is already felt. According to a report of the Ministry of Trade, household consumption decreased in January, which was its strongest decrease in almost four years. At the same time, they climbed to production prices, which further stimulated inflation. Companies are beginning to sound alarm: Target, one of the largest retailers in the country, warned that its margins would be “significantly affected” by increasing import costs. In the ISM Index manufacturing sector, the ISM shows that industrial activity occurs with a decrease in new orders and flaming raw materials.
Pressure markets: between uncertainty and flight values into refuge
While the effects of customs tariffs are beginning to weigh the real economy, financial markets must not be overcome. Since the beginning of March, Dow Jones has lost 4.5 %, which has erased the profits achieved after the Trump elections last November. This lower movement reflects the growing distrust of investors who fear that the US economy will be trapped in a negative spiral that mixes inflation and stagnation. “We follow the collapse of consumer confidence and an increase in uncertainty,” explains Mark Hackett, the main strategist in the national level.
Investors respond and massively turn to government bonds, causing a decrease in US 10 years to 4.2 %. This phenomenon, known as the inversion of the speed curve, is a historically avant-thin signal of recession. At the same time, other alternative assets benefit from this instability: gold and bitcoins record an increase, confirming their refuge status in times of crisis. The question is no longer whether the economy slows down, but rather for what speed and at what intensity.
The federal reserve system in a strategic dead end will be accelerated in combination with the slowdown of growth. Should it reduce its rates to start activities, with the risk of deterioration of prices? Or, on the contrary, keep them at a high level, even if it means highlighting economic slowdowns? A gentle decision that reminds the difficult decisions of the 1970s, when the Fed ended in growing sacrifices to interrupt inflation. Meanwhile, companies, investors and consumers remain suspended from other economic indicators. If stagflation was to be permanently determined, it could mean a turnover in American monetary and budgetary policy. But outside the United States, this uncertainty could be well expanded to world markets, which would create a new cycle of instability.
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A graduate of the Toulouse and the Blockchain Consultant Certification certification holder and I joined the adventure of Cointribuna in 2019. I convinced of the potential of blockchain to transform many economy sectors, committing to raising awareness and informing the general public about how the ecosysty developed. My goal is to allow everyone to better understand blockchain and take the opportunity they offer. I try to provide an objective analysis of messages every day, decrypt trends on the market, hand over the latest technological innovations and introduce the economic and social issues of this revolution.
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The words and opinions expressed in this article are involved only by their author and should not be considered investment counseling. Do your own research before any investment decision.