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The economy’s resilience so far to President Trump’s global trade war risks emboldening him and unleashing the sort of economic devastation that economists have long feared.
July 14, 2025Updated 1:03 p.m. ET
President Trump has had little reason to scale back his global trade war ambitions with inflation subdued, unemployment stable and U.S. stock markets back to record highs.
But the latest escalation, including 30 percent levies on the European Union, could deliver a much more painful blow to the United States. If the tariffs go into effect on Aug. 1, it could unleash the sort of devastation to consumers and businesses that economists have long worried about and Mr. Trump has mostly avoided. Their fear stems from the specter of a stagflationary shock, in which inflation intensifies as growth stalls.
“The higher that tariffs end up being, the more stagflationary it will be,” said Eric Winograd, an economist at the investment firm AllianceBernstein.
Tariffs have already had an impact on the economy in a number of ways, and the levies now threatened against the European Union risk causing even more painful disruptions, given that the bloc and the United States are each other’s largest trading partners.
Ursula von der Leyen, the president of the European Commission, said in a statement that Mr. Trump’s latest tariffs “would disrupt essential trans-Atlantic supply chains, to the detriment of businesses, consumers and patients on both sides of the Atlantic.”
So far, businesses have been able to mitigate some of the impact of Mr. Trump’s levies. To get ahead of the tariffs, they stockpiled products earlier this year, causing imports to surge before later crashing down. Americans have grown less confident about the economy as uncertainty surrounding Mr. Trump’s policies have frozen businesses in place.
