Edward Conard

Top Ten New York Times Bestselling Author

  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
Upside of Inequality Oxford Unintended Consequences

AI Summary. A trade war is by definition a stagflation shock, raising prices while lowering sales, and persistent policy uncertainty could lead consumers and firms to hold back spending and hiring. If tariffs on Canada and Mexico persist for months, the Federal Reserve is likely to focus on a rising unemployment rate and begin cutting rates.

Torsten Sløk Apollo
Date Posted:

Torsten Sløk argues that policy uncertainty “could create a sudden stop in the economy where consumers stop buying cars, stop going to restaurants, and stop going on vacation, and companies stop hiring and stop doing capex.”

Does a trade war create a stagflation shock that forces rate cuts?

Core argument: A trade war is by definition a stagflation shock, since tariffs raise prices while sales fall, leaving the Fed facing higher inflation alongside a rising unemployment rate.

The bigger risk to markets is sentiment. We are already seeing consumer sentiment and corporate sentiment being impacted. If policy uncertainty persists, consumers and firms may begin to hold back spending decisions. Combined with DOGE-driven layoffs, this will put upward pressure on the unemployment rate. From a Fed perspective, the biggest problem is that tariffs increase prices and hence inflation. That is why a trade war, by definition, is a stagflation shock: Higher prices and lower sales. If tariffs on Canada and Mexico continue for several months, then the Fed will focus on the rising unemployment rate and start cutting rates soon. The biggest downside risk is that policy uncertainty could create a sudden stop in the economy where consumers stop buying cars, stop going to restaurants, and stop going on vacation, and companies stop hiring and stop doing capex. The key indicator to watch over the coming weeks is jobless claims.

Takeaways by Macro Roundup® AI

  1. A trade war is by definition a stagflation shock, since tariffs raise prices while sales fall, leaving the Fed facing higher inflation alongside a rising unemployment rate.
  2. Consumer and corporate sentiment are already being affected, and if policy uncertainty persists, consumers and firms may hold back spending decisions, which combined with DOGE-driven layoffs would push the unemployment rate higher.
  3. If tariffs on Canada and Mexico continue for several months, the Fed will focus on the rising unemployment rate and start cutting rates soon, with jobless claims the key indicator to watch.

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