Ed Yardeni, whom CNBC calls "one of the biggest bulls on Wall Street," claimed President Donald Trump’s extensive tariffs are raising the risk of "stagflation."
Stagflation occurs when there's stagnant economic growth combined with high inflation and high unemployment. A full-blown recession happens when the economy shrinks, as evidenced by two successive quarters of declining gross domestic product.
CNBC reported that Yardeni sent a note to clients Thursday, saying, “It has dawned on Wall Street (and us!) that President Trump’s tariffs aren’t negotiating chips to help the U.S. lower tariffs around the world, promoting free trade. They’re trade barriers, triggering other countries to respond in kind, and they jeopardize U.S. inflation and economic growth."
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Trump's on-again, off-again tariffs on Mexico, Canada, China, and the EU have caused major market instability, and Yardeni Research has now lowered its best-case S&P 500 target for 2025 by almost 9%," CNBC reported.
“We can’t ignore the potential stagflationary impact of the policies that Trump 2.0 is currently implementing haphazardly,” Yardeni said. “In response to the now heightened risk of stagflation, we are lowering our S&P 500 valuation expectations and year-end price targets. If tariffs stick, the one-time price increase and uncertainty regarding its impact on inflation expectations are likely to be enough to keep the FOMC on pause."
The Federal Open Market Committee is the policy-setting arm of the U.S. Federal Reserve.
Just Thursday, Trump issued a fresh threat to impose 200% tariffs on all alcoholic products coming from the European Union in retaliation for its "nasty 50% tariff on whisky."
Trump wrote on Truth Social, "If this Tariff is not removed immediately, the U.S. will shortly place a 200% Tariff on all WINES, CHAMPAGNES, & ALCOHOLIC PRODUCTS COMING OUT OF FRANCE AND OTHER E.U. REPRESENTED COUNTRIES. This will be great for the Wine and Champagne businesses in the U.S."