The impact of tariffs has come to the surface, and does a negative GDP mean that stagflation is just around the corner?

First, it should be noted that the main reason for the negative GDP is actually the expansion of the U.S. trade deficit, which is triggered by the ‘panic’ import behavior caused by tariff policies. See Figure 1

Simply put, companies are hoarding goods in advance, resulting in a further expansion of the trade deficit.

Tariffs may further distort the economy, affecting consumption, prices, and risks, and of course, close attention needs to be paid to the subsequent policy implementation and global trade reactions.

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Returning to the discussion of ‘stagflation’ and ‘recession’, I believe that recent data does not clearly indicate that the U.S. economy is on the path to recession. Or this Friday's unemployment rate and non-farm payrolls may provide a clearer answer.

In the context of ‘incomplete data’, we can directly observe market reactions. Last night, the U.S. stock market fell by about 2.5%, which is a significant drop, but it recovered before closing, proving that investors or ‘capital’ do not believe that the data can accurately reflect a recession.

Waiting for this Friday's data.