New Data Shows U.S. Tariffs Triggering Threat Of Stagflation

Forbes - Apr 18th, 2025

J.P. Morgan is the first major Wall Street institution to predict a U.S. recession occurring in the second half of 2025. This prediction is driven by rising inflation, tariffs, and a recent contraction in factory activity in both the U.S. and parts of Asia, including Japan, South Korea, and Taiwan. The ongoing tariffs have led to increasing unemployment and slower growth, with significant effects on the automotive industry, which has faced targeted tariffs causing layoffs and production stoppages. The Trump administration's pause on country-specific tariffs does not affect the existing 25% tariffs on cars, auto parts, steel, and aluminum, exacerbating costs for manufacturers. Companies like AGP Group, Stellantis N.V., and General Motors Co. are among those affected, with actions such as plant closures and production halts.

The broader economic implications suggest a looming stagflation scenario, characterized by high unemployment and inflation. Global default rates are expected to rise, and many companies may need to restructure financially. The impact on supply chains is profound, with China imposing new export controls on rare earth elements crucial for numerous industries, potentially leading to supply shortages. Small businesses are particularly vulnerable, as evidenced by a 20% drop in the Russell 2000 index and significant job losses reported by Intuit QuickBooks. The economic strain is evident across sectors with complex supply chains, illuminating the widespread effects of tariff-driven economic policies.

Trump Administration Tariffs Automotive Industry Small Businesses J.P. Morgan U.S. Recession Factory Activity China Export Controls Russell 2000

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RATING

6.8

Fair Story

Consider it well-founded

The article provides a comprehensive overview of the economic risks associated with tariffs and the potential for stagflation in the U.S. economy. Its strengths lie in its clarity, timeliness, and focus on public interest issues, making it a valuable resource for understanding current economic challenges. However, the article could benefit from greater balance and transparency, particularly in presenting diverse perspectives and providing detailed sourcing for its claims. By enhancing these areas, the article could increase its credibility and impact, engaging readers more effectively in discussions about trade policy and economic strategies.

Accuracy

The story presents a largely accurate depiction of the economic situation related to tariffs and potential stagflation in the U.S. economy. Key claims, such as the forecast of a recession by J.P. Morgan, the impact of tariffs on inflation and unemployment, and the challenges faced by the automotive industry, are consistent with broader economic analyses and expert opinions. However, certain specific details, such as the exact numbers related to refinancing difficulties and Everstream Analytics data, lack direct external confirmation, which slightly affects the precision of the story. Overall, the story aligns well with the consensus on the economic risks posed by tariffs, though it would benefit from more precise sourcing for some claims.

Balance

The article primarily focuses on the negative impacts of tariffs and the potential for stagflation, presenting a somewhat one-sided view of the economic situation. While it effectively highlights the risks and challenges posed by tariffs, it does not provide counterarguments or perspectives that might suggest potential benefits of tariffs or alternative economic strategies. The inclusion of diverse viewpoints, such as those from policymakers or economists who support tariffs, would enhance the balance and provide a more comprehensive view of the issue.

Clarity

The article is written in clear and straightforward language, making complex economic concepts accessible to a general audience. It maintains a logical flow, with each section building upon the previous one to paint a cohesive picture of the economic risks posed by tariffs. The tone is neutral and informative, avoiding sensationalism. However, the inclusion of more detailed explanations or definitions of economic terms could further aid comprehension for readers unfamiliar with the subject matter.

Source quality

The article references credible entities like J.P. Morgan, Moody's, and Everstream Analytics, which adds authority to its claims. However, it lacks direct quotes or specific data from these sources, which would strengthen its reliability. The absence of named sources or direct attributions for some of the claims, such as specific company actions and economic forecasts, slightly undermines the article's credibility. Including more direct citations and a broader range of sources would improve the overall quality.

Transparency

The article provides a general overview of the economic situation but lacks detailed explanations of the methodologies or data sources used to support its claims. It does not disclose any potential conflicts of interest or biases that might affect its reporting. Greater transparency about the basis for its claims, such as specific studies or reports, and any affiliations or interests of the sources cited, would enhance the article's trustworthiness.