Are we headed towards a stagflation crisis?

In a political climate defined by disruption and disorientation, it’s hard to pinpoint a single word that captures the essence of the moment — but “uncertainty” may be the most fitting for 2025.

I recently sat down with John Hood — conservative historian, author, and president of the John William Pope Foundation — for a candid conversation about where things stand, and where they may be headed. Hood, a longtime voice within the conservative movement, did not hold back. He described the sweeping tariff strategy, especially the 10% universal import tax, as “a policy disaster — economically, politically, and institutionally.”

For Hood, the deeper issue isn’t just the bad economics — it’s the erosion of congressional authority.

“Congress is emasculating itself,” he warned. “It’s the primary branch in our constitutional system, and yet lawmakers are lobbying the White House instead of asserting their power.”

That’s not just a Trump issue, he added. It’s a growing pattern across multiple administrations, Democrat and Republican alike, where presidents bypass the legislative process and act through executive fiat.

The most immediate impact of Trump’s new policies is being felt in financial markets. Since the announcement of sweeping tariffs on April 2 — what the White House dubbed “Liberation Day” — an estimated $10 trillion in global equity value has been erased. This is more than a political firestorm; it’s an economic wildfire. While it’s still too early to fully determine the long-term impact of these tariffs, the markets are already reacting with volatility. And as investors face mounting margin calls, forced liquidations are only deepening the sell-off.

Beyond the stock tickers and trading desks, there are real, downstream consequences. As everyday Americans watch their portfolios shrink, their spending habits will change. Whether it’s dining out, vacationing, shopping, or making major purchases, consumer confidence takes a hit when net worth evaporates. That’s particularly troubling considering consumer spending drives nearly 70% of the US economy. In short: what begins as a financial contraction could easily snowball into a broader economic slowdown.

There’s already evidence of that. A growing majority of CEOs now believe we are either in a recession or on the verge of one, with most agreeing that no significant capital expenditures will be made in the near term. That pullback in business investment is another chilling signal — especially for small businesses, where the private credit market is tightening and lenders are growing increasingly cautious. What started as a tariff policy may quickly trigger economic contagion.

And then there’s the global context. America’s international partners are deeply frustrated. At a recent Treasury auction, foreign demand for US bonds was underwhelming — a red flag that signals waning confidence in the nation’s fiscal stewardship. If foreign governments lose interest in US debt, borrowing costs will rise, further slowing growth. Bond investors, increasingly worried about Washington’s lack of seriousness in reducing spending, are already demanding higher yields. As a result, many asset managers are seeking safer havens outside the US.

This leaves the Federal Reserve in a bind. Normally, the Fed responds to slow growth with rate cuts. But with tariffs threatening to push up prices and growth simultaneously stalling, we enter a dangerous zone where inflation rises while economic output shrinks. That’s the textbook definition of stagflation, a phenomenon we haven’t seen in decades. And while the administration talks about reshoring jobs as a silver lining, that too brings risk: onshoring will drive up labor costs in an already tight job market. The Fed needs to seriously consider augmenting policy tools for a new environment.

Many believe these measures will ultimately strengthen America. But as the National Association of Manufacturers and key allies like Elon Musk begin to sound the alarm, it’s clear that support for this agenda is fracturing — even from within.

My conversation with Hood ended on a sobering note. “No president should have gone inside and started breaking things,” Hood said. “But at the same time, maybe we should’ve put a latch on the door.”

Whether Republicans will reclaim their constitutional principles — or continue to rationalize their retreat — remains to be seen. But what’s clear is that we are witnessing not just a shift in policy, but a potential turning point for the American economy.