US Economy Faces Stagflation and Potential Recession: Top Economist's Four Predictions

Torsten Sløk, chief economist at Apollo Global Management, warns that the US is at a critical turning point regarding stagflation. This dilemma of slowing economic growth coupled with high inflation is more difficult to resolve than a typical recession.
According to a report by Business Insider, Sløk pointed out in a recent white paper that President Trump’s tariff policies are the main cause of the stagflation risk. He explained that tariff increases typically lead to stagflation impacts, increasing the likelihood of economic slowdown while pushing prices higher.
Wall Street has downgraded its forecasts for US economic growth this year, but has raised inflation expectations, which is a typical characteristic of stagflation. Sløk has made four predictions for the current environment of the US economy:
- GDP to be Halved: Sløk estimates that GDP growth may slow to about 1.2% by 2025. Compared to a high point of 3.1% year-on-year growth in Q3 2024, economic growth will be cut by more than half.
- Inflation to Remain Above Average: According to Apollo's forecast, inflation may hover around 3% by year-end. This is a significant increase from the previous expectation of 2.4% before the tariffs were announced.
- Unemployment Rate to Keep Rising: The unemployment rate in the US is expected to continue rising for at least the next 18 months. Apollo estimates that it could rise from the current 4.2% to 4.4% in 2025, and reach 5% or higher in 2026.
- Recession Possible as Early as This Summer: Apollo estimates a 25% chance of recession occurring in the next 12 months. Sløk noted that before the tariff policies were announced, the company had not anticipated a recession this year. He indicated that the economy could fall into recession as early as this summer.
It is noteworthy that in recent months, Sløk has consistently warned of the risks of stagflation and potential recession, despite the majority of Wall Street forecasters expecting that the economy will avoid recession this year, particularly as the US continues making progress in trade negotiations.