The economic consequences of former President Donald Trump’s sweeping tariffs may be just beginning, and according to one of Wall Street’s top economists, the real damage will become visible before the end of 2025. Torsten Sløk, chief economist at Apollo Global Management, believes inflation is on a clear upward trajectory, with the worst yet to come.
Inflation's Upward March
In an interview with Bloomberg, Sløk warned that the tariffs imposed earlier this year are already feeding into rising consumer prices. Recent data supports his outlook: the overall inflation rate climbed to 2.7% in June from 2.4% in May, and prices for durable goods are rising after a long period of declines. But this, he says, is "only the take-off stage."
Sløk expects services inflation, which makes up about 60% of the CPI, to follow suit soon, partly due to Trump’s deportation policies tightening the labor supply and pushing up wages. "The Fed needs to wait and see where the peak actually lands,” he concluded, suggesting that any talk of rate cuts is premature.
Looming Threat: Stagflation
One of the more troubling predictions Sløk made involves the potential for stagflation—a rare and difficult economic condition with high inflation and slow growth. This scenario leaves the Fed with no good options:
- Cutting rates to boost growth risks accelerating inflation.
- Raising rates to fight inflation could further choke off growth.
Final Thoughts
While much of the economic impact of Trump’s tariffs has yet to fully materialize, signs of strain are already showing. With inflation picking up and wage pressures mounting, the road ahead for the U.S. economy looks increasingly uncertain. The coming months will be critical in determining whether the country can avoid a full-blown stagflation shock, or if tougher times are on the horizon.
