In This Article

• How today’s stagflation echoes — and differs from — the 1970s
• Why Trump’s tariffs are the new oil shock, only self-inflicted
• How inflation expectations are already feeding the fire
• Why the Federal Reserve is out of tools and out of time
• What this means for everyday Americans — and who’s profiting from it

Back to the ’70s: How Tariff Inflation Could Trigger a Stagflation Economy

Stagflation, a term coined in the 1970s, is an economic phenomenon that was not expected to recur, especially not in our current times. It defies the traditional economic rules, which suggest that an economy is either growing with some inflation or contracting with none. However, we are now facing the prospect of both scenarios simultaneously. The key difference from the ’70s is the cause of inflation. Then, it was triggered by an OPEC oil embargo. Today, it’s a result of the actions of the current administration, which seems to believe that taxing the American consumer is a good way to “stick it to China and everyone else.”

They have reimposed—and expanded—tariffs across the board. There is a 25% tax on imported autos and auto parts, as well as fresh levies on steel, aluminum, electronics, batteries, and nearly every product coming out of China. It’s the economic equivalent of setting your own house on fire to keep the neighbors from stealing your firewood.

Tariffs Are Taxes — Don’t Call Them That

While some may view tariffs as a patriotic move, the reality is starkly different. Tariffs are not a tax on foreign countries, but on American importers, manufacturers, and consumers. The cost doesn't stay in China when a 25% tariff is slapped on an imported car or part. It directly affects your invoice, price tag, and monthly payment, burdening the American consumer.

Worse, the North American auto supply chain is a tangled mess of border crossings. A single car part might cross the U.S.-Mexico-Canada border three or four times before it’s installed in a finished vehicle. That means the same tariff gets applied repeatedly, stacking like compounding interest on a payday loan. A Ford or GM vehicle built in Michigan might now cost $4,000 to $6,000 more — not because it’s better, but because it’s been caught in this economic mousetrap.

Inflation Expectations: The Fire That Feeds Itself

One of the most dangerous aspects of inflation is how easily it becomes psychological. Once businesses believe prices will rise, they start acting like it’s already happening — regardless of whether their actual costs have changed. Companies raise prices not because they need to but because they can. It’s preemptive greed dressed up as risk management. We’re already seeing this behavior play out in industries like automotive and construction. Dealerships are hiking car prices weeks or months before higher costs reach them. Construction firms stockpile materials like steel and concrete, increasing prices in anticipation of scarcity. Retailers, meanwhile, are quietly adjusting price tags upward and blaming “economic uncertainty” — a term that now functions more like a hall pass for opportunistic inflation.

We’ve seen this movie before. During the pandemic, corporations used supply chain disruptions and shipping delays as a convenient cover to raise prices far beyond what their balance sheets justified. Many even bragged about it on earnings calls. President Trump’s sweeping tariffs are now handing them a shiny new excuse. The tariffs haven’t rippled through the entire supply chain yet, but prices are already climbing. Why? Expectations are doing the heavy lifting. This is textbook expectation-driven inflation — not a natural reaction to market forces but a reflexive cycle driven by fear, speculation, and the relentless pursuit of profit. It’s how inflation becomes self-sustaining, even before the real damage arrives.

The Fed Is Caught in a Trap of Its Own Design

The Federal Reserve, after a prolonged campaign of interest rate hikes to control consumer demand, now finds itself in a difficult situation. Its own forecast shows a potential 2–3% drop in GDP for the first quarter, signaling a potential recession. Yet, prices continue to rise, driven not by overheating demand but by external forces like tariffs and artificially inflated supply chain costs. This puts the Fed in a no-win situation. Any action they take could have severe consequences, making the future uncertain and potentially alarming for the audience.

If the Fed does tighten further, it could turn a precarious situation into a punishing one. Mortgage rates could climb, freezing out first-time buyers and deflating a fragile housing market. Auto loans could spike, making even basic transportation unaffordable for millions. Credit card interest could become a trapdoor for the working poor, turning everyday purchases into long-term debt. Businesses with higher borrowing costs could cut hiring, delay investments, or shut their doors entirely.

Consumer spending, already bruised by higher prices, could take another hit. And yet, the price of that made-in-China or Mexico washing machine or smartphone could still creep up — not because of market dynamics, but because the tariff that caused the surge in the first place is still in effect. In other words, monetary policy is fighting a fire it didn’t start with tools that only spread the flames.

We’re Not in the 1970s Anymore, Dorthy

Inflation in the 1970s was driven by factors beyond our control: oil shocks, geopolitical crises, and union negotiations. This time, it’s entirely self-inflicted. They have manufactured an economic crisis in slow motion—one that hits the middle and working class the hardest while giving the wealthy and well-connected another opportunity to profit.

Companies don’t just pass on costs — they mark them up. And when you shrink the supply of foreign competition, domestic producers see an open road to charge more. Protectionism doesn’t protect you from inflation. It protects corporations from having to compete — and lets them pad their profits behind a red, white, and blue curtain.

If they continue down this path — and there’s no sign they plan to stop — we could easily see inflation climb back toward 5–6% by year’s end and perhaps higher. And if the Fed keeps raising rates to counter it, GDP could shrink even further. That’s the classic definition of stagflation: rising prices, falling output, and no good options in sight.

But unlike the 1970s, we don’t have strong unions, real wage growth, or robust public programs to soften the blow. We have gig work, record household debt, and a political system that seems more interested in revenge than recovery.

And let’s be honest — this isn’t just bad policy. It’s malicious incompetence. It’s one thing to suffer an economic crisis. It’s another to be governed by someone who manufactures one for political points and cable news soundbites. We’re not slipping back into the 1970s. We’re being shoved.

About the Author

Robert Jennings is the co-publisher of InnerSelf.com, a platform dedicated to empowering individuals and fostering a more connected, equitable world. A veteran of the U.S. Marine Corps and the U.S. Army, Robert draws on his diverse life experiences, from working in real estate and construction to building InnerSelf with his wife, Marie T. Russell, to bring a practical, grounded perspective to life’s challenges. Founded in 1996, InnerSelf.com shares insights to help people make informed, meaningful choices for themselves and the planet. More than 30 years later, InnerSelf continues to inspire clarity and empowerment.

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Article Recap

America is sliding toward a stagflation economy, driven not by foreign oil or global shocks, but by President Trump’s self-inflicted tariff inflation. With rising prices, shrinking GDP, and a Federal Reserve caught in the crossfire, we may be headed for a 1970s-style crisis — only this time, it’s made in America. The longer this economic sabotage continues, the more likely it is that everyday Americans will pay the price for one man’s delusions of economic war.

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