The various import rates and other protectionist economic measures announced by the President of the United States, Donald Trump, brought in the field a debate that concerns any economy: the risk of stagflation.
Stagflation occurs when an economy simultaneously faces high inflation, high unemployment and low economic activity, a rare combination.
One of the main examples occurred in the US in the 1970s, during the oil crisis, when OPEC embargoes fired the barrel price, raising production costs and boosting inflation. As the American economy depended strongly on imported oil, the impacts were even more severe.
Some economists compare the situation to Donald Trump’s protectionist wave, warning that without a significant – and unlikely – increase in industrial production, the US may face high prices and economic slowdown.
However, economists heard by CNN They claim that it is too early to talk about stagflation.
For Carla Beni, economist and teacher at the Getúlio Vargas Foundation (FGV), the situation is still very preliminary, explosive and media.
“For a stagflation scenario, it is necessary to fall into economic activity, increase unemployment and increase inflation. This is very rare. You can’t even think about the possibility of stagflation right now, ”he said.
The economist also argues that more time is needed to see to what extent the measures will mature.
“We need a maturation time of these results, these tariffs applied, to see up to six months in the American economy if prices will rise, and follow the fall in economic activity for at least two or three quarters,” he said.
Another factor that reduces the risk of stagflation is the likely drop in government popularity, which would increase the pressure for economic adjustments to contain inflation and reheat the economy.
“If you have a drop in activity and increased unemployment, you will have a drop in government popularity, which can back down on measures before setting up a stagnation process,” he concluded.
Economist Fernando Barros Jr, a professor at the University of São Paulo, also states that it is not yet time to talk about stagflation.
“We are already seeing a lot of analyzes showing that the US economy should lose size with tariffs and prices should rise. However, I still think talking about stagflation is something more for the long run and we need a deeper analysis, ”he said.
