You probably already know that Trump’s totally voluntary, completely idiotic, massive tariffs may end up triggering a deep recession.

But economists—both left and right—are also warning it may also trigger something far worse that anybody who lived through the 70s remembers well: stagflation.

In this NOTICE News Deep Dive, we’ll look at:

• What is stagflation?

• What caused stagflation in the ‘70s

• What may cause it now (spoiler alert: Trump)

• What the right wants to do

• What progressives want to do

• What we as individuals can do

Keep reading to understand why this isn’t just bad economics—it’s a warning from history we can’t afford to ignore.

About the author: Andrew Springer is an Emmy award-winning journalist who also worked for Bernie Sanders. Find out more about him.

🧨 What is stagflation?

Stagflation is a rare and frustrating economic condition where three things happen at the same time:

1. Stagnant economic growth

2. High inflation

3. High unemployment

These three things normally don’t occur together.

For example, inflation usually goes up when the economy is growing fast and unemployment is low—because people are spending more, driving prices up.

• But during stagflation, prices rise even though the economy is weak and people are losing jobs.

It’s difficult to control because the levers that economists usually employ to stabilize the economy make one problem better while making another worse.

To fight inflation, our central bank, the Federal Reserve, raises interest rates to make borrowing more expensive.

• That means people and businesses take out fewer loans, spend less, and invest less. With lower demand, prices stop rising so fast. However, this can put the brakes on a growing economy.

To fight stagnant growth and unemployment, the Fed usually does the exact opposite: they lower interest rates.

• This puts more money into the economy, heating things up, which raises the cost of products and services—inflation.

It’s like having a car that’s both overheating and stalling. You need to step on the gas and hit the brakes at the same time. You can’t win easily.

🕺 Stagflation of the ‘70s

Anybody who lived through the ‘70s and early ‘80s probably remembers this economic nightmare well.

But what caused stagflation then wasn’t just one thing—it was a perfect storm of bad luck, bad policy, and big shifts in the global economy.

Experts don’t all agree on the details, but most point to four key causes behind the stagflation of the ‘70s:

1. Spikes in the price of oil (oil shocks)

2. Too much money in the economy

3. Nixon ending the gold standard

4. A wage-price spiral

1. Oil shocks: In 1973, oil-producing nations cut off oil supplies to countries that supported Israel in the Yom Kippur War.

• The price of oil quadrupled almost overnight—causing the price of almost everything to rise. This is called cost-push inflation.

Years later the Iranian Revolution—when far-right ideologues rebelled against a CIA-installed dictator—caused another massive spike in oil prices.

2. Too much money: Because Lyndon Johnson didn’t want to further enrage the public by raising taxes to pay for critical social safety net programs and his genocidal war in Vietnam, he let the government borrow a ton of money.

• At the same time, the Fed kept interest rates low, a critical mistake— believing that unemployment was a greater threat than inflation.

This combination—high spending and easy money—pumped too much cash into the economy, leading to rising prices and growing inflation, even before the oil shocks of the 1970s hit.

3. Ending the gold standard: If that weren’t enough, in 1971, Richard Nixon ended the gold standard, meaning the U.S. dollar was no longer tied to gold.

• Without that anchor, the dollar lost value on global markets.

That made imports more expensive—everything from oil to electronics—which also drove prices up across the economy and made inflation even worse.

4. Wage price spiral: As the cost of everything went up, workers (rightfully) started demanding more money for their labor.

• Rather than eat into corporate profits, corporations passed those costs onto consumers—and then some.

This started a nasty spiral where prices and wages chased each other upward—which conservative politicians and pundits blamed on workers for asking to be paid fairly.

💊 How did we get out of it? One word: painfully. Millions of workers paid the price to “restore confidence” in the economy.

• In 1979, Paul Volcker became Fed Chair and began jacking up interest rates from around 11% to over 20% by 1981.

This made borrowing nearly impossible for everyday people and small businesses. It did eventually tame inflation—but it also triggered a deep recession, and caused massive layoffs.

• Unemployment hit 10.8% in 1982—the highest since the Great Depression.

Inflation finally broke in 1983, partially thanks to stabilizing gas prices, and Volcker was hailed as a hero by Wall Street and the political class.

• But that set the stage for Reaganomics, the beginning of the hollowing out of the middle class, the rage that followed, and the rise of Donald J. Trump. 

🍊 Why stagflation now?

Economists are now sounding the alarm that we could be headed toward a new era of stagflation—thanks to Trump’s trade war. Here’s why:

• Tariffs are taxes on imported goods—and usually corporations pass those costs directly to consumers.

That means everyday essentials get more expensive: cars, electronics, clothes, even groceries. This is classic cost-push inflation, just like in the 1970s.

But there’s more: When countries retaliate (like China implementing its own 34% reciprocal tariff), that too will push prices upward.

• Add in the possibility of global supply chains seizing up (partly to blame for last year’s inflation) and an economic system that wants to protect profits at all costs (aka greedflation, also to blame for inflation in 2024), and prices could skyrocket.

At the same time, with our country’s economic policy being set by the whims of an unstable narcissist, many analysts and economists believe companies will stop investing and growing—stagnant economic growth.

The consequences: In addition to inflation, companies could also start laying people off, and Wall Street could take a major tumble—seriously jeopardizing the retirement funds of millions.

🛑 Stopping stagflation

Of course, the simplest way to avoid stagflation right now is for Donald Trump to relent on his idiotic and ill-conceived tariffs.

• But barring that—economists on both the left and right have ideas of what can be done to limit the impact of Trump’s tariffs, and what we can do on an individual level.

Thanks for reading and supporting NOTICE News. We’ll be back next Sunday with another Deep Dive.