Nobel-winning economist warns Trump policies risk causing stagflation

Nobel Prize-winning economist Joseph Stiglitz flagged major concerns for the economy under President Trump, claiming fluctuating policies put the nation at risk of stagflation.

“It risks the worst of all possible worlds: a kind of stagflation,” Stiglitz, who served as chair of former President Clinton’s Council of Economic Advisers, told The Guardian. 

He said shifting tariffs will cause corporations to question where to set up shop and base their factories amid an uncertain future. 

“If you’re a corporate in the US or in Europe, do you think you have a global market, or do you have just a European market? Where do you locate your factories?” he asked.

Stiglitz noted the U.S. has become a “scary place to invest” due to the unexpected abandonment of government contracts and trade agreements, including the US-Mexico-Canada economic deal brokered by Trump during his first administration. 

Within his first month in office, the president signed off on 25 percent tariffs on Canada, 25 percent tariffs on Mexico but then delayed the action following their willingness to enforce his suggested border security strategies. 

He also approved a study on proposed reciprocal tariffs on countries he claims have placed unfair policies on the U.S. 

Stiglitz and others, including Former Treasury Secretary Larry Summers, have said the commander-in-chief is making the wrong move.

“Almost all economists agree that the tariffs will increase prices. How much it will increase prices is a little bit affected by the magnitude of the appreciation of the exchange rate, but all economists think that the extent of the appreciation of the exchange rate won’t be anywhere near enough to compensate for the tariffs,” he told The Guardian. 

“I could certainly see a scenario where we get to stagflation – we get inflation, and a weak economy. I cannot see a really robust economy, because I just see the global economy suffering so much from the uncertainty that Trump poses.”

Despite criticism, Trump said short term pain is worth the benefit of restructured trade policies. 

“This will be the Golden Age of America!” Trump wrote on Truth Social. “Will there be some pain? Yes, maybe (and maybe not!). But we will make America great again, and it will all be worth the price that must be paid. We are a country that is now being run with common sense — and the results will be spectacular!!!”