Trump's New Tariffs Spur Stagflation Fears Amid Market Volatility

Trump’s new round of sweeping tariffs has reignited investor concerns about the economy slipping into a stagflationary period, according to Danny Moses, a well-known investor and the founder of Moses Ventures, who gained public attention through the book and film The Big Short. Moses argues that despite some strong economic indicators and the economy’s current resilience, signs of stagflation—characterized by economic stagnation and inflation—are already emerging [1].

The latest tariffs, including a 39% tax on Swiss exports and a 35% tax on some Canadian exports, mark a new phase in Trump’s trade strategy. Unlike previous rounds that primarily aimed to reduce trade deficits, these tariffs appear to be politically motivated, such as the imposition on Brazil amid the prosecution of Jair Bolsonaro. Moses described the tariffs as “thoughtless” and “unprecedented,” emphasizing the unpredictability they bring to the economic landscape [1].

Markets reacted with a dip following the announcement and a weaker-than-expected jobs report, reversing a recent rally fueled by strong earnings and reduced trade-war concerns. Moses noted that these developments have heightened investor anxiety about the economy’s future, especially given the uncertainty surrounding the long-term effects of the tariffs [1].

While the U.S. economy showed a rebound in Q2 growth, the first half of the year still saw a slowdown. Moses argues that the full impact of the tariffs has not yet materialized. Federal Reserve Chair Jerome Powell recently maintained interest rates, acknowledging the need for more data before deciding on a rate cut. Powell suggested that while tariffs might temporarily raise prices, the inflationary effects could either be short-lived or persist, posing a significant risk to economic stability [1].

Moses warns that as inflation rises and companies face mounting costs from tariffs, they will likely absorb losses by either reducing margins or passing costs to consumers. Either way, the result will be a combination of lower corporate earnings and higher prices, leading to stagflation. “Pick your poison,” Moses remarked. “It’s either going to hit corporate margins and earnings will go down, which means the market’s expensive, or it’ll be passed on to the consumers and be inflationary. I think it’s going to be a combination of both” [1].

White House spokesperson Kush Desai dismissed concerns as “panic and paranoia,” highlighting the recovery in growth and cooling inflation. However, Moses and others argue that the long-term effects of aggressive protectionism remain uncertain. The debate underscores the delicate balance between protecting domestic industries and maintaining the flexibility of global supply chains [1].

As central banks and policymakers monitor inflation and economic activity, the warning from Moses reflects a cautious view shaped by historical patterns and current market conditions. His remarks serve as a reminder of the potential unintended consequences of aggressive trade policies in a globalized economy [1].

Source:

[1] 'The Big Short' investor: As Trump mounts new tariffs ...

https://fortune.com/2025/08/01/big-short-investor-stagflation-warning-trump-tariff-announcement-danny-moses/