It took 100 years for the US to bring its average tariff rates down from 59% in 1930, but it took less than 100 days for Trump to push them back to their highest levels since the Great Depression.

As a result, US real GDP shrank by 0.3% in the first quarter of 2025, marking the first contraction since early 2022. The U.S. economy is now in a state of stagflation—a rare and troubling combination of economic contraction and rising inflation.

Prices surge, store shelves stand bare, the Port of Los Angeles reels from a 30% drop in activity, and consumer sentiment plunges. Equity markets falter, CEO confidence erodes, and small and medium businesses (SMEs) teeter on the edge of collapse. Yet for Donald Trump and his billionaire allies, this era of American stagflation is trivialized as merely 'children having two toys instead of thirty'.

Trump’s tariffs impacted 185 countries, with China facing a staggering 245% tariff rate, while other nations saw tariffs ranging from 10% to 60%, leaving them in a state of escalating uncertainty. These tariffs targeted hundreds of billions of dollars in imports, putting at risk US$ 8 trillion in American affiliate sales abroad—affecting major American companies like Apple, Tesla, Starlink, McDonald's, Nike, Ford, and Intel—and threatening tens of trillions of dollars in US corporate profits embedded in global supply chains. Additionally, the impact extended to services supporting these chains, including payment systems (MasterCard and Visa), insurance companies (State Farm and Berkshire Hathaway), IT firms (Microsoft and IBM), legal services (Skadden, Arps, Slate, Meagher & Flom and Baker McKenzie), and accounting and consulting firms (Deloitte and PwC).

Simultaneously, inflationary pressures have intensified. The core Personal Consumption Expenditures (PCE) index, a key measure of inflation, rose to 3.5% in the first quarter, indicating that price increases are becoming more entrenched. It increased from 2.5% in Q4 2024. This inflation surge, coupled with economic contraction, is the hallmark of stagflation. The Fed Reserve has warned that inflation can reach 4.2% this year.

Consumer sentiment has deteriorated, reaching 86, the lowest since May 2020. In the meeting between Trump and CEOsof  Target, Walmart, and Home Depot, the major retailers in the US, they have warned Trump of empty shelves in the coming weeks. Consumers have seen corresponding increasing retail prices of groceries and home supplies (The Future of Commerce).

US business leaders are increasingly concerned about Trump’s tariffs, citing disrupted markets, delayed investments, and reduced hiring. The erratic trade policies have made the business environment more uncertain, prompting companies to retract earnings forecasts and postpone key projects. The share of CEOs planning to expand their workforce fell to 32%, and those planning to reduce their workforce ticked up to 27%. This suggests that while some executives are hopeful, many are bracing for continued economic challenges (The Conference Board).

The manufacturing sector is also under pressure. In the first quarter of 2025, the US manufacturing sector exhibited signs of contraction. The PMI dropped from 50.9 in January to 48.7 in April, signaling a contraction in manufacturing. A PMI below 50 reflects declines in new orders, production, and employment. The Prices Index surged to 69.4, highlighting rising input costs, while the Inventories Index increased to 53.4, indicating higher stockpiles. These trends reflect ongoing supply chain disruptions and escalating production costs, partly driven by Trump’s tariffs.

Trump’s tariff challenges are also reflected in the labor market. The unemployment increased from 3.9% in December 2024 to 4.2% in April 2025 (Bureau of Labor Statistics). The increased unemployment rate has been coupled with moderate job openings. Layoffs are increasing, and workers who lose their jobs are finding it harder to secure new employment. Along with ongoing layoffs and minimal wage growth, this has left many Americans feeling pessimistic about their financial futures.

The stagflation in Trump’s first 100 days in office is just the beginning. From market titans like Larry Fink of BlackRock, Jamie Dimon of JPMorgan Chase, and Jerome Powell, Chair of the US Federal Reserve, to Nobel laureates like Daron Acemoglu, Paul Krugman, and Joseph Stiglitz, the warnings have grown louder: Trump’s tariffs are steering the US economy toward recession (a recession is typically defined as two consecutive quarters of negative economic growth). But the present condition is far more troubling—this is not merely a downturn; it is stagflation, as economic contraction is now accompanied by inflation and escalating global uncertainties.

The worst part of the current US stagflation is Trump’s deflection of blame onto his predecessor, President Joe Biden, despite the US economy growing by 2.4% in Q4 2024 under Biden’s leadership. Trump’s refusal to take responsibility undermines his credibility and raises a critical question: What has he done for the economy in his first 100 days in office? This deflection exposes his fundamental inability to improve the U.S. economy, much less address its challenges.

The current economic situation is dire, but not irreversible. With thoughtful policy decisions and a commitment to addressing both inflation and economic growth, it is possible to steer the US economy back on course. However, this requires acknowledging the reality of stagflation and taking responsibility for the policies that have contributed to it. The first step in reversing the damage is tackling the core issue: Immediately revoking Trump’s unilateral tariffs on all countries.

To all supporters of the "Make America Great Again" (MAGA) movement: This is neither Biden’s economy nor Trump’s—it is the US economy. It belongs to the workers who pay taxes to pay the salaries of the president and public officials. It concerns the livelihoods of 341 million Americans. It determines the future of America and its position in an increasingly shifting global order.

The American people deserve a leader who prioritizes their economic survival over political rhetoric.

A leader who provides solutions, not confusion,
A leader who takes responsibility for the economy, not delusion.
A leader who serves the people, not self-profusion.

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Lili Yan Ing

Secretary General, the International Economic Association

The views expressed here are personal