Odd Lots Lots More on a Massive, Historical, Stagflationary Shock
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Apr 4, 2025 
Tom Orlik, Chief Economist for Bloomberg Economics, dives into the complexities of the recent stagflationary shock triggered by sweeping tariffs announced by President Trump. He discusses the unexpected fallout on the stock market and the broader implications for U.S.-China trade relations. Orlik analyzes how these tariffs might influence global trade dynamics, manufacturing strategies, and economic indicators. With inflation concerns mounting, he offers insights into navigating this challenging economic landscape and the potential international reactions from key players like China and Europe.
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Free Trade's Unfulfilled Promises
- The US embraced free trade in the 1990s, believing it would benefit US firms and encourage Chinese reform.
- This didn't happen; China became a rival, and the US now faces a large trade deficit.
Global Trade System Shock
- The new tariffs target not just China, but also US allies, impacting the global trading system.
- Models suggest these tariffs could drastically reduce US-China trade and European exports to the US.
Inflationary Impact of Tariffs
- Unlike previous tariffs, these are unlikely to be offset by dollar appreciation or transshipment.
- US retailers may absorb initial costs, but ultimately, consumers will likely face price increases.