Fox Business guest: Trump's tariffs have “a real potential ... to add up to at least stagflation, if not outright recession”
Ed Yardeni: “It's very likely for the next few months we'll see higher inflation” as a result of Trump's “ridiculous” tariffs and “disastrous trade policy”
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From the April 3, 2025, edition of Fox Business' Making Money
CHARLES PAYNE (HOST): Ed, you know, stocks are selling off. And I just, you know, want to get your initial thoughts. Obviously, I think those reciprocal tariffs were a lot more than anyone had anticipated.
ED YARDENI (GUEST): Yeah, you're right. Clearly, the market's down dramatically. Notwithstanding the festivities of the Rose Garden yesterday, the markets interpreted it as basically bad for the stock market, bad for the U.S. economy, for the global economy. And I think there's clearly a real potential here for all this to add up to at least stagflation, if not outright recession in the second half of the year. So, the market's down because suddenly all that uncertainty is driving valuations lower, and earnings expectations are being notched down.
But you know what? I think that the reaction here, the stock market, may get the attention of the White House. I know they have said they don't pay attention to the market, but they have to pay attention to a day like today. A big drop in the stock market can create a recession by having a big negative wealth effect. And I also think there's going to be a lot of negotiations going on here. I mean, some of these tariffs are just ridiculous to the point that they can't be serious, as a tennis player once said.
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YARDENI: I can't see that [Federal Reserve chair Jerome Powell] or anybody at the Fed is going to be rushing to bail out this disastrous trade policy by lowering interest rates, especially since it's very likely for the next few months we'll see higher inflation, particularly auto prices are going to go up and anything related to autos. And so, I think the Fed's kind of been checkmated here from cutting rates. I don't think there will be a rate cut this year, even if the economy falls into a shallow recession, which I think is increasingly possible, in the second half of the year.