Mid-Year Economic Outlook on Stagflation Risks

This technical report presents an analysis of the current economic landscape amid rising stagflation risks due to the new tariff regime introduced by President Trump. The report outlines the implications of the average US tariff rate of 15.8%, the highest in nearly nine decades, on both domestic and global economies. It details how these tariffs are expected to increase the likelihood of a US recession to 25% within the next year and raise inflation expectations to 3.0%. The report further discusses the impact on corporate and consumer spending, highlighting a contraction in new orders and a decline in consumer confidence. It also addresses the potential headwinds faced by sectors reliant on foreign supply chains and the anticipated effects of geopolitical tensions, such as the Israel/Iran conflict, on oil prices and economic growth. The analysis concludes with insights on investment opportunities amid these challenges, emphasizing the importance of focusing on sectors less affected by tariffs.