Experts are expressing concern that steep new U.S. tariffs primed to take effect on March 4, along with planned levies on other trading partners, could fan inflation and slow the nation’s growth — an economic malaise known as “stagflation.”
President Trump on Thursday said on social media that 25% tariffs on Canada and Mexico, which had been delayed for a month while the sides negotiated, will now roll out next week as scheduled. He also this week announced an additional 10% tariff on imports from China, on top of those already in place, set to kick in next week, while 25% tariffs on steel and aluminum imports are lined up for March 12. Sweeping reciprocal tariffs and levies on automobile imports may be deployed as soon as early April, while Mr. Trump has threatened to hit imports from the European Union with 25% duties.
Mounting uncertainty about the scale and potential impact of such tariffs, including the “somewhat abrupt and arbitrary way” in which they’ve been announced, risks throttling spending by consumers and businesses, said Marcus Noland, director of studies at the Peterson Institute for International Economics, a nonpartisan research firm.
“Normally I’d say tariffs alone would damage the economy, but won’t send the U.S. into recession,” he told CBS MoneyWatch. “What gives me pause about that now is the unsettling way that that the administration is going about its business and general confusion about tariffs. It’s not so much the actual tariffs but confusion about them that’s causing an increase in uncertainty and is really pushing down investment.”
EY-Parthenon chief economist Gregory Daco said the Trump tariffs, “if pushed to their extreme,” could even trigger a recession. U.S. businesses would bear the added costs from taxes on imports and mostly pass them along to American consumers, which would weigh on spending.
A recent survey from EY-Parthenon found that 50% of business executives said they would pass on two-thirds or more of any increased costs they incur from tariffs to consumers.
“In a world where your imports cost 25% more, or even 10% more, there is going to be a notable impact on prices and inflation,” Daco told CBS MoneyWatch. “That will lead to demand destruction, so if the administration presses too hard on the tariff front there is a negative effect on our import prices and on inflation.”
Fears of a trade war are raising concerns among businesses and consumers, he added. U.S. consumer confidence plunged in February in what was the biggest monthly decline in more than four years, a sign that growing uncertainty over Trump’s policies is taking a toll, the Conference Board said this week.
“They are fearful of incoming inflation so if anything, the policies put in place have the tendency to be inflationary, and there is not only a risk of a recession, but stagnation,” Daco said, referring to the periods intense economic distress in the 1970s marked by stagnant economic growth and high inflation.
U.S. consumer spending fell in January compared to the previous month, dropping for the first time in nearly two years, according to data from the Commerce Department. The 0.5% slump was partly attributed to weather, but was also “another illustration that President Trump’s tariff threats are not sitting well with households,” analysts with Capital Economics said in a report.
Another potential drag on the economy, according to economists: the Trump administration’s push to shrink the U.S. government, including through mass job cuts. That will have a spillover effect and could limit spending at U.S. businesses.
“Federal workers all support jobs in the local economy by spending on Uber drivers, at restaurants, sporting events and barber shops,” Ryan Sweet, chief U.S. economist at Oxford Economics, told CBS MoneyWatch. “So there will be some negative effects elsewhere in the economy.”
contributed to this report.
More from CBS News
The post U.S. set to unleash tariffs on Canada, Mexico and other countries. Economists are worried. appeared first on World Online.
