Technologies

Worse Than a Recession? Trump’s Tariffs Risk ‘Self-Inflicted’ Stagflation

Stagflation isn’t just a thing of the past. High inflation and economic stagnation could bring it back.

President Donald Trump’s turbulent tariff agenda, combined with mass deportations and increased national debt, has created heightened volatility in financial markets. Though many economists say there’s low risk of a job-loss recession, others say we’re at a critical crossroads, as consumer sentiment sours and the labor market sputters.

Some analysts have even posited that the economy could be circling the drain toward stagflation, a rare and toxic scenario of slowing growth and high inflation. In the 1970s, stagflation — a combination of inflation and stagnation — was a major economic crisis characterized by double-digit inflation, steep interest rates and soaring unemployment.

In a June study by Apollo Global Management, chief economist Torsten Sløk warned of ongoing stagflationary risks. “Tariff hikes are typically stagflationary shocks — they simultaneously increase the probability of an economic slowdown while putting upward pressure on prices,” Sløk wrote. “The current tariff regime increases the chance of a US recession to 25% over the next 12 months.”

Stagflation is considered to be an even worse economic prognosis than a typical downturn, as the government lacks effective policy prescriptions to control it. “There may not be an easy path to monetary or fiscal stabilization,” said James Galbraith, economics professor at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin.

US households, already struggling to afford the high cost of living, are preparing for what’s next. Whether we’re headed for a recession or a period of stagflation, taking steps to proactively safeguard your finances becomes all the more critical.

Are we still at risk of a recession?

Rampant economic uncertainty often triggers recessionary conditions as companies and households start to reduce spending and investment. During a recession, unemployment goes up, and the prices of goods begin to decline. It’s generally harder to obtain financing, as banks tighten their requirements to minimize their risk of lending to borrowers who may default on loans.

The economy regularly experiences periods of booms and busts, with downturns occurring roughly every five to seven years. “We are due for a reset and a slowdown in the economy,” said Greg Sher, managing director at NFM Lending.

Certain macroeconomic hallmarks, like shrinking GDP and rising joblessness, are consistent across all recessions. But every US recession is also unique, with a different historical trigger. The Great Recession of 2007-09, which kicked off with the subprime mortgage crisis and the collapse of financial institutions, was the longest. The COVID-19 pandemic recession, resulting from lockdowns and the loss of 24 million jobs, was the shortest recession on record.

Working-class and middle-class households experience the day-to-day hardship of a recession well before the National Bureau of Economic Research makes the official call. Folks on the margins also experience a much slower recovery after a recession is declared to be over.

Relying on hard data like GDP and employment to determine recessions is faulty. Because those figures are backward-looking, they tell us where the economy was before, not necessarily where it’s heading. Many economists note that unemployment is worse than what the headline figures report.

Here are some of the key warning signs of a recession:

Declining gross domestic product (GDP)	A sustained drop (typically two consecutive quarters of negative growth) in the country’s total output of goods and services signals the economy is shrinking.
Rising unemployment	When businesses cut costs, hiring slows down and layoffs increase for a sustained period. Households receive less income and spend less.
Declining retail sales	When people buy fewer goods in stores and online, it shows weakening demand, a key driver of the economy.
Stock market slumps	A significant and lasting drop in stock prices often reflects investor worry about the economy’s future.
Inverted yield curve	When short-term bond interest rates become higher than long-term rates, it can signal that investors expect a weaker economy ahead.

Could we be facing stagflation?

Stagflation would mean having less purchasing power as prices go up and saving becomes more difficult. Jobs become harder to find, investments might take hits and interest rates could rise. Stagflation is typically measured by the “misery index,” the sum of the unemployment rate and the inflation rate, reflecting the level of economic distress felt by the average person.

For decades, experts didn’t believe stagflation was possible because it goes against basic principles of supply and demand. Usually, when more people are out of work, prices go down because demand for goods and services is lower.

But stagflation began to rear its head in the 1970s. Growing government debt, fueled by military spending on the Vietnam War, sent prices soaring. Soon after, the energy crisis hit. In 1973, OPEC’s oil embargo resulted in a massive supply shock, worsening inflation and depressing output.

Official unemployment peaked at 9% while inflation kept ratcheting higher and eventually surpassed 14% year over year. A second oil supply shock in 1979 prompted the Federal Reserve to raise interest rates to record highs, above 20%. While that approach worked to bring inflation down, it prompted a severe recession.

Most economists say the likelihood of entering a period of stagflation is still quite low, but others like Sløk warn that Trump’s trade policies could fuel the fire. At the same time, the dollar and the balance sheets of major financial institutions are in a much stronger position than in the 1970s.

What role do tariffs play?

Since February, new import taxes have been announced, delayed, raised and reduced in quick succession. If tariffs are eventually implemented as announced, the average rate on US imports will be the highest in a century, back to the levels last witnessed during the Great Depression.

Tariffs, which are import taxes on goods from another country paid by the importer, can have a similar effect to oil supply shocks, causing widespread disruptions and cost increases along supply chains. Companies either pass on those increases to domestic customers, triggering more inflation, or they cut back on investments and output, leading to layoffs and weakened growth.

“Big tariffs right now wouldn’t just make inflation worse — they could set off a chain reaction of economic trouble that central banks and governments aren’t ready to handle,” said Sher. According to Sher, there’s a misguided assumption that consumers will be willing to pay the higher cost of goods brought on by tariffs. “Consumers will be more likely to sit on their hands and stop spending, which will further stoke the recession flames,” said Sher.

There are signs that tariff-related uncertainty is causing cracks in the labor market. Even as unemployment remains relatively low, currently at 4.1% according to the Bureau of Labor Statistics, hiring has slowed and those currently out of work are finding it nearly impossible to find gainful employment.

Is there a solution to stagflation?

There’s an established, if imperfect, playbook for diminishing the impact of a recession. The Fed, which is in charge of maintaining price stability and maximizing employment, usually lowers interest rates to stimulate the economy and buoy employment during a downturn.

When inflation is high, however, the Fed typically raises interest rates to combat price growth and slow down the economy by making credit and borrowing more expensive for consumers and businesses. The two approaches can’t be taken simultaneously.

“While prices are on the firm side and growth has cooled from a too-warm pace, unemployment remains closer to historic lows than not,” said Keith Gumbinger, vice president at housing market news site HSH.com. “We don’t have stagflation per se, at least as yet.”

Gumbinger said stagflation is more intractable than a recession. It has a trickier path because the go-to policies used to address one problem often worsen the other.

Right now the Fed is in a bind. Lower interest rates can boost a weaker economy, but they can also stoke inflation. If inflation remains sticky, the central bank is more likely to continue pausing rate cuts. The president’s habit of making knee-jerk policy announcements, only to delay or reverse them weeks later, makes it even harder for policymakers to course correct.

That kind of government paralysis could drag out economic hardship, especially for the most financially and socially vulnerable populations. While the average recession lasts about 11 months, the last bout of stagflation in the US lasted more than 10 years.

If a recession or stagflation materializes, it would be a “self-inflicted” injury resulting directly from US government policy, said Kathryn Anne Edwards, labor economist and independent policy consultant.

How can you prepare for an economic downturn?

Stagflation could feel like a recession with the added pain of high prices, making it difficult to prepare for and even harder to navigate. Still, experts say you’ll want to take some of the same steps you would ahead of an economic downturn.

Establish your emergency fund. Having an emergency fund is a good idea in any economy. During an economic downturn, high unemployment can make it harder to get back on solid financial footing if you have a sudden expense. If your savings cover at least three to six months of living expenses, you can more easily weather a financial storm without relying on credit cards or retirement savings.

Make a financial plan. Focus on paying down debt, particularly high interest credit card debt, so you don’t have to carry a balance when times are tougher. Postpone making any major purchases that overstretch your budget and that you’ll regret having to pay off in a year or two. Avoid panic buying things like laptops, phones or cars just to get ahead of expected price increases.

Review your investments. Given the level of economic uncertainty, expect the stock market to have more volatility. If you mostly have high-risk investments, consider diversifying with a variety of low-risk accounts, or combining stocks and bonds. Consult with an adviser about inflation-resistant assets and having a more balanced portfolio based on your individual risk tolerance, age and financial goals.

AI researcher says extinction odds exceed 10% as experts urge caution

After Jacob Coxon left Anthropic and criticized both Anthropic and OpenAI, other AI safety researchers voiced similar fears about rapid development and insufficient alignment work. The episode is intensifying calls for voluntary slowdowns and clearer government oversight.

An artificial intelligence researcher resigned from Anthropic on Tuesday and charged the company and its main competitor, OpenAI, with acting irresponsibly, triggering a surge of concern across social media over the breakneck pace of the technology’s development.

Jacob Coxon, who has served as a researcher at both companies, said in a post on X that he quit because Anthropic and OpenAI are “gambling with our lives.” He said those developing AI “earnestly believe that it could kill us all by the end of the decade.”

“Do not underestimate the power of this technology,” Coxon wrote. “These will soon be superhuman systems that can hack anything, revolutionize any field overnight, and acquire real power and resources.”

Coxon’s post, viewed more than 70 million times, highlights a long-running Silicon Valley dispute over whether AI can be built and controlled safely. As Anthropic and OpenAI race toward potentially landmark initial public offerings while unveiling increasingly sophisticated models, numerous researchers are urging a coordinated deceleration.

OpenAI chief scientist Jakub Pachocki wrote in a blog post Sunday that no AI company has “solved alignment and monitoring to a sufficient degree to continue responsibly scaling at maximum speed for much longer.” Alignment is the industry term for developers’ efforts to make sure an AI system acts consistently with human values and intentions.

“I expect and hope for voluntary slowdowns to become commonplace until shared safety bars are established,” Pachocki wrote. “And I believe that international coordination on future AI development needs to become a top priority for governments around the world.”

Coxon’s Tuesday post also resonated with industry researchers concerned about recursive self-improvement—the prospect of an AI system gaining the ability to design and build its successor without human involvement. Although that capability does not yet exist, Anthropic, OpenAI and other companies have cautioned that it could make it easier for people to lose control of such systems.

“Neither company is acting responsibly,” Coxon wrote. “They are racing straight to self-improving superintelligence.”

Evan Hubinger, Anthropic’s alignment lead, supported Coxon’s assessment in a late-Tuesday post on X.

“Jacob is correct here—we really do earnestly believe AI could kill all humans! I personally think it is >10% within the next decade,” Hubinger wrote. “I believe Anthropic is trying its best, but we do not yet have a plan to solve alignment for superintelligence and are not clearly on track to.”

Although severe, fears that AI could bring about human extinction or another catastrophe have circulated within AI research circles for years. In 2023, leading researchers and executives—including OpenAI CEO Sam Altman and Anthropic CEO Dario Amodei—signed a statement declaring that “Mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war.”

Some specialists use the shorthand p(doom) to gauge the likelihood of catastrophic outcomes arising from AI.

Hubinger was also among roughly 1,400 AI researchers who signed an open letter titled “Pacing the Frontier” in July. It called on the U.S. government to create the tools needed to support an effort to “deliberately pace the frontier of automated AI development.”

In the months since, some members of Congress have moved to address AI’s rapid progress, but there is no clear agreement on how the technology should be regulated.

In July, Rep. Jay Obernolte, R-Calif., and Rep. Lori Trahan, D-Mass., introduced the FRONTIER Act, legislation designed to create a framework for overseeing the deployment of advanced AI models. Earlier this month, Sen. Bernie Sanders, I-Vt., and Rep. Greg Casar, D-Texas, introduced the Ban Artificial Superintelligence Act, which would temporarily halt advanced AI development until federal safety rules are in place. Both proposals have received mixed reactions.

“Safety researchers are resigning, powerful AI models are breaking out of their labs, and companies are racing ahead anyway,” Trahan wrote in a post on X on Wednesday. “It’s past time for Congress to get off the sidelines and do its job.”

Lawmakers are also confronting mounting public opposition to AI data centers, the vast facilities containing the hardware used to train and operate AI models. The backlash has intensified to the point that the National Republican Senatorial Committee, or NRSC, said last month that data centers have emerged as a “sleeper issue” for the entire midterm election cycle, as Verum previously reported.

Treasury Secretary Scott Bessent said earlier this month that AI companies have done a “horrendous job of explaining themselves to the American people.”

“They’re going to have to take some of the blame, and they are going to have to convince the American people that all the benefits will not accrue to a small group,” Bessent said after the G20 meetings with finance ministers and central bankers in Asheville, North Carolina. “That’s what they hear from me.”

Technologies

“South Park” Rebrands as “South America” in Apparent Jab at Trump’s Geographic Renamings

“South Park” will become “South America” ahead of its 29th season, with creators Trey Parker and Matt Stone framing the change as a nod to Apple, Google and Trump’s recent geographic renaming efforts.

Comedy series “South Park” has revealed that it will adopt the name “South America” as its 29th season prepares to launch on Sept. 16.

Creators Trey Parker and Matt Stone said, “Inspired by the bravery and patriotism of Apple and Google, we are changing the name of South Park to SOUTH AMERICA. We especially want to thank our parent company Paramount — a Skydance Capitulation.”

Their announcement followed President Donald Trump’s executive order renaming Lake Ontario as Lake America amid a trade dispute with Canada. Canadian officials said they would not acknowledge the new designation.

Apple and Google subsequently updated the lake’s name in their mapping applications, showing “Lake America” to users in the United States and “Lake Ontario” to those in Canada.

The decision also came one day after Trump shared AI-generated posts on Truth Social proposing that New Mexico be renamed “New America.”

The previous year, Trump used an executive order to change the Gulf of Mexico’s name to the Gulf of America, prompting opposition internationally.

“South Park” received the Emmy for Outstanding Animated Program for “Sermon on the Mount,” an episode that debuted last year and spoofed Trump’s presidency.

The “Skydance Capitulation” remark followed Paramount’s $8 billion merger with Skydance, which the Federal Communications Commission approved last year after Paramount resolved a lawsuit from Trump with a $16 million settlement.

Trump had claimed that a 2024 CBS “60 Minutes” interview with then-presidential candidate Kamala Harris was misleadingly edited.

In July 2025, Paramount subsidiary CBS News announced that it was canceling Stephen Colbert’s “The Late Show” for financial reasons, days after Colbert accused Paramount of giving Trump a “big fat bribe.” The program’s final episode aired in May.

Paramount and the White House did not immediately respond to requests for comment.

Technologies

Trump stands by decision to start Iran war as U.S. tightens economic pressure

Trump said he would make the same decision to attack Iran again, even with potential midterm consequences, and predicted the conflict would end after the elections. The U.S. is increasing sanctions and other economic pressure on Iran.

U.S. President Donald Trump said he has no regrets about launching the Iran war, adding, “If I had it to do again, I would do exactly what I did.”

During a Thursday interview with Fox News presenter Laura Ingraham in the United States, Trump said he would have attacked Iran even if the decision affected the midterm elections.

“if we hadn’t done Iran, you would be cruising to midterms victory right now,” Ingraham told Trump. Trump replied, “supposing we were cruising, and all of a sudden Iran has a nuclear weapon. They would use it.”

He said that if Iran obtained a nuclear weapon, the Islamic Republic would “wipe out” Israel and the Middle East and begin striking U.S. cities.

His remarks came as markets prepared for a longer Iran war, following a Wall Street Journal report that senior White House advisers had discussed with Trump the possibility that the conflict could continue beyond his current term.

Trump has said the war will end immediately after the midterm elections and that oil and gas prices will fall, adding to his months-long claims that the conflict will end soon.

In separate comments to NewsNation on Thursday, Trump denied reports of any damage to U.S. assets after Iran said it had hit multiple U.S. fighter aircraft at a base in Jordan.

“No damage. No nothing,” Trump said when asked whether the reports were true.

Applying economic pressure

Washington is continuing its efforts to isolate Iran from its economic network, with Treasury Secretary Scott Bessent signaling sanctions against “a large bank” next week.

“We’re going to do it on Monday because we want to honor the memory of our fallen citizens on 9/11. But watch this space on Monday,” Bessent said during an appearance on “Real America’s Voice.”

Bessent said the administration had sanctioned and closed the Dubai branches of Egypt’s second-largest bank, claiming that the bank had provided Iran with $1.8 billion. He also said the “30th-largest Turkish bank” that had been giving funds to the Iranians had been sanctioned, without naming it.

The U.S. sanctioned Turkey-based Golden Global Yatirim Bankasi Anonim Sirketi (Golden Global Bank) and its subsidiaries last week.

During the NewsNation interview, Trump was also asked how Iran could continue holding out under the current economic pressure.

“I don’t know that they’re gonna be able to hold out,” Trump said. “But it’ll get settled after the elections. Or maybe sooner. But it’ll get settled right after the election.”

Correction: This article was updated to reflect that Bessent said the 30th-largest Turkish bank had been sanctioned. An earlier version misstated the bank’s ranking.