Stagflation has emerged as a concern due to the current economic tumult

The economic uncertainty brought by president Donald Trump’s tariff for American commercial partners raises fears that the economy may face stagnation if circumstances continue.

The recession is a term that is generally used to describe the scenario in which economic growth is stagnant while also witnessing high inflation, which leads to high prices of consumers and may contribute to the weakness of the labor market, and eventually high unemployment.

Definitions are taxes on imported goods, which are paid by importers who usually pass some or all the high costs they face to consumers through high prices, a dynamic that has raised concerns about the return of inflation. The inflation forecast for consumers has increased in recent months in the investigative studies conducted by the Federal Reserve before the high prices caused by the customs tariff that are dealt with for many consumer goods.

Modern economic data has added to concerns about the emergence of a possible recession. Data issued by the Ministry of Commerce last week showed that the US GDP (GDP) was contracted at an annual rate of 0.3 % in the first quarter of 2025. This represented the first separate contraction in the American economy since the first quarter of 2022.

The American economy slows down sharply, and shrinks 0.3 % in the first quarter with the weight of definitions

“Even if the weak gross domestic product today may be partially reflected in companies trying to advance the customs tariff, it was still a warning against the arc,” said Ellen Zintner, the chief economist of Morgan Stanley, to the report, on the report last Wednesday.

David Banson, the administrative partner and chief investment official at Bahnsen Group, told Fox Business in an interview that a recession environment constitutes a challenge to the federal reserve as the central bank is looking to balancing its double mandate of strengthening stable prices and maximum.

The American trade deficit set a record in March

The recession will be a challenge to the Federal Reserve and President Jerome Powell as the central bank balances its double mandate. (Alex Wong/Getty Emose)

“There is nothing that the central bank can do about the recession because, in this case, it is not the reason for the high cash prices,” Bnson explained. “It will not be because there is a lot of money that chases a little goods, it will be because there is an external upward pressure on prices as a result of the customs tariff policy and the prices of new inputs are completely higher outside the central bank.”

And Bannon went on to say that while the Trump administration is expected to decline to the largest part of the tariffs at some point, allowing high prices to be not binding, the uncertainty surrounding the duration and extent of the tariff policy may cause economic slowdown as companies withdraw an investment pending more clarity.

“I do not think that price increases will be permanent, mostly because I think the Trump administration will eventually end in the big walk on most of the definitions they threaten,” he said. “I think the biggest issue is the recession, which is, what is the slowdown in economic growth due to policies?”

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“This is my greatest occupy, but I don’t really have the ability to answer it. I really don’t have the ability to get rid of how things will go, because I do not know if he will back down from all tariffs tomorrow,” Banson said. “The size of the economic impact and the length of the economic impact are really directly linked to the continuation of a lot of uncertainty, and we have no clarity in that now.”