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The US economy is currently facing a difficult situation with stagflation. Chief Economist Torsten Sløk from Apollo Global Management has warned that the US economy is at a crucial turning point. Stagflation, a situation of slowing economic growth coupled with high inflation, presents challenges that are more complex than traditional economic recessions.
Impact of Trump's Tariff Policy
Sløk pointed out in his latest white paper that former President Trump's tariffs are a primary cause of the risk of stagflation. Increasing tariffs typically leads to a dual problem that raises the chances of economic slowdown while also pushing up prices. Wall Street's forecasts for US economic growth have been downgraded, while inflation expectations have been adjusted upwards, perfectly exemplifying the characteristics of stagflation.

Four Predictions:
1. GDP Growth to Halve: Sløk estimates that GDP growth could slow to around 1.2% by 2025. This represents a reduction of more than half compared to the peak of 3.1% annual growth in Q3 2024. According to the latest estimates from the Bureau of Economic Analysis (BEA), GDP is projected to contract by 0.3% in Q1 2025, marking the first contraction since 2022.
2. Inflation to Remain Elevated: Apollo predicts that inflation will linger around 3% by the end of 2025. This represents a significant increase from previous estimates, which pegged inflation at about 2.4% prior to Trump's April announcement of tariff increases.
3. Unemployment Rate to Rise: Unemployment in the US is expected to continue climbing for at least the next 18 months. Apollo estimates that the unemployment rate might rise from the current 4.2% to 4.4% in 2025, and potentially to 5% or more in 2026. Although the projected unemployment rate is historically low, rising unemployment has historically been associated with periods of stagflation.
4. Economic Recession Possible This Summer: Apollo estimates a 25% chance of a recession occurring in the next 12 months. Sløk indicated that until Trump's tariff policies were enacted, the company did not anticipate a recession this year. He believes that a recession could occur as early as this summer, introducing the idea of a “voluntary trade restructuring recession,” wherein tariffs slow demand for port and truck transport in the US, leading to empty shelves and declining sales for businesses. He maintains that this risk remains, as the effects of Trump’s tariffs are still “fermenting within the trade pipeline.”

Conclusion
Despite most Wall Street analysts' consensus that the economy will avoid recession this year, Sløk has continuously warned about the risks of stagflation and a potential recession.