Stagflation is gaining attention in financial markets as President Trump pledges more tariffs, with equivalent levies expected to be implemented soon. The concerns about stagflation, characterized by a combination of economic stagnation, persistent inflation, and rising unemployment, have increased due to disappointing economic data and uncertainties surrounding trade policies and other government actions, such as proposed job cuts at the Department of Government Efficiency. Analysts like Ed Yardeni are raising the chances of the US entering a stagflation phase to 45%, emphasizing the potential for a mild recession in the latter part of the year.

Various economic indicators, such as weakening manufacturing output and increasing costs for purchasing managers, suggest an impending rise in inflation, a key component of stagflation. Recent data showing lower consumer spending and higher-than-expected inflation point to emerging signs of stagflation in the economy. While the Federal Reserve anticipates that tariff-related inflation will be short-lived, many experts believe that such inflation will have a lasting impact.

Economists also worry about downward risks to growth due to the uncertainties surrounding Trump's trade policies. The Federal Reserve Bank of Atlanta's GDPNow tracker indicates a potential negative growth of 2.8% in the first quarter, underscoring the concerns about economic slowdown.