Trump's policies may trigger stagflation risk: a dual challenge of economic growth and inflation

With Trump's victory, the U.S. market was initially optimistic about his policies, but another outlook proposed by economist Phil Suttle is worth noting: if Trump implements more aggressive immigration and tariff policies, the U.S. could face a panic situation of stagflation in the coming years.

Potential triggers of stagflation

1. Impact of immigration policy

• If immigration flows are cut off and some workers are deported, the labor market will lose growth momentum and may even experience contraction.

• A reduction in the labor force will have a direct impact on productivity and economic activity, weakening the potential for U.S. economic growth.

2. Impact of tariff policy

• Higher tariffs not only suppress international trade but may also drive up the prices of goods and services, increase business costs, and burden consumers accordingly.

• Suttle predicts that these policies could lead to stagnation or even contraction of the U.S. economy between 2025 and 2026.

Possible economic consequences

1. Increased inflation pressure

• Labor shortages and tariffs will push up production costs, causing inflation rates to rise above 3% annually, exacerbating price pressures.

• Sustained high inflation may force the Federal Reserve to maintain higher interest rates, further suppressing economic growth.

2. Economic stagnation or recession

• Policies may limit economic vitality, particularly in labor-intensive sectors such as manufacturing and services.

• Economic stagnation, combined with rising prices, creates a typical stagflation environment.

Outlook and countermeasures

1. Balancing policy strength

• The Trump administration needs to find a balance between protecting national interests and maintaining economic vitality to avoid overly aggressive policies leading to stagflation.

2. Expanding labor supply

• Filling labor shortages through skills training or attracting high-skilled immigrants can alleviate economic pressure.

Summary

Although Trump's policies may initially boost market confidence, in the long run, if immigration and tariff policies are too aggressive, the risk of stagflation will significantly increase. This will not only affect the stability of the U.S. economy but may also have spillover effects on the global economy. The government and market need to prepare in advance to mitigate potential negative impacts.