Economists are already seeing signs of impending stagflation under Trump.Image: keystone
analysis
Because of the Iran war, there is now a threat of stagflation instead of an upswing.
March 15, 2026, 6:19 p.mMarch 15, 2026, 6:19 p.m
Until recently, even the US President’s opponents expected that Trump would succeed in triggering an economic boom this year. For example, Daleep Singh, economic advisor to Joe Biden, explained in an interview with Watson:
“I expect the American economy to boom this year because of AI and because consumption remains very strong. It is the wealthy who drive this consumption thanks to the profits from their AI stocks. In addition, key interest rates will probably fall and fiscal policy will continue to be expansionary. There is therefore a risk that economic growth will be too strong and therefore inflation will also rise.
Thanks to the war, no one now has to worry that the growth of the American economy will be too strong. But the fear of rising inflation remains. This is not due to the fact that Americans are consuming too much, but rather that prices are skyrocketing due to the new oil shock. According to experts, this shock has already reached historic proportions.
Daleep Singh, economic advisor to Joe Biden.
And that in turn has far-reaching consequences: the central bank (Fed) will not be able to lower key interest rates and may even have to raise them. On the other hand, the “affordability” crisis will worsen, because rising oil prices have the unpleasant property of spreading into almost all areas of the economy. Not only does the price of gasoline rise, but – because food has to be transported – so does food. More expensive fertilizers exacerbate this tendency. In addition, the situation on the mortgage front remains tense because the Fed cannot make the expected interest rate cuts. Homeowners and tenants suffer equally from this.
Tom Porcelli, chief economist at Well Fargo Bank, summarizes the result in the New York Times as follows: “Everyone was hoping for tailwind from fiscal policy. If the oil price stays at this level for a longer period of time, this tailwind will now disappear. That’s a shame, because I was convinced that there was a lot going on to boost consumption.”
“Just don’t panic,” they’ll say at this point. Ultimately, the mini-crash of April 2, 2025, when Trump announced his reciprocal tariffs, quickly vanished into thin air. Yes, the stock markets have even rushed from one record to the next and interest rates on government bonds have fallen back to a bearable level.
Anyone hoping to get a bargain this time using the buy-the-dip strategy is in for a rude awakening. Andy Haldane, the former chief economist at the Bank of England, states in the Financial Times:
«The shock of today and the war will leave a much deeper mark than the shock of last year. In 2025, inflationary pressure eased and central banks around the world were able to lower key interest rates and thus offset the impact of tariffs. With rising energy prices, this option no longer exists.”
If there is a winner in the Iran war, it is China. At the end of the month, President Xi Jinping will be able to receive his American counterpart calmly. He has good cards. He doesn’t have to worry about running out of oil. His reserve stores are full and his brother Vladimir Putin will provide supplies.
Trump, on the other hand, has played an important trump card into Xi’s hands with his war: rare earths. As is well known, China has a de facto monopoly on these minerals, and modern military goods in particular depend on them for better or for worse. An F-35 fighter jet alone needs around 400 kilos of rare earths, but drones and missiles cannot find their targets without them.
As gasoline prices rise, electric cars are also becoming more attractive, and the models from BYD and Co. have a price-performance ratio that the Western competition cannot keep up with.
Exploding gasoline prices in the USA.Image: keystone
Trump is turning a blind eye to these dangers. Although there is little to suggest that the oil price will soon settle back down to a range between $60 and $70 a barrel, he adamantly maintains: “Inflation is falling, incomes are rising, the economy is booming and America is being respected again.”
More and more economists, however, are already talking about the threat of stagflation, an economy with stagnant growth and rising inflation. Andy Haldane puts it this way:
“Taken together, there are powerful stagflation forces. Last year, the tech and tariff waves neutralized each other. This year, however, they complement each other and thus strengthen each other. This speaks of instability, not stability – economic, financial, fiscal and political. That’s why it’s really different this time.”