Tariffs, Trucking, and Trouble: How Policy Could Spark Stagflation

Stagflation—the combination of high inflation, slow economic growth, and rising unemployment—is back in the headlines. With President Trump's new global tariffs and economic warning signs flashing across the freight and labor markets, risks are low but rising.

There is no easy policy fix for this scenario. Wall Street is looking to the Federal Reserve for assurances, but the Fed is stuck between two competing risks—should it raise interest rates to keep inflation low or cut interest rates to juice the economy and avoid a potential recession?

If President Trump can use tariffs to negotiate, it may reduce the negative economic impact of the tariffs. A successful negotiation with a major trading partner would likely pull some of the losses on Wall Street back into the market. However, trade negotiations take time, and the US could be well into a slowdown before any progress can be noticed by a trade deal.

Here’s how the current policy actions could steer the U.S. toward stagflation—and how it’s already taking shape.

Massive Tariffs Introduced

On April 2, 2025, President Trump announced sweeping tariff increases, setting a base 10% tariff on nearly all imports and applying elevated rates—up to 46%—on goods from 57 countries. This represented the largest trade-related tax increase since World War II. However, implementation of the tariffs was temporarily paused following backlash from key industries and international partners.

Impact: The initial announcement triggered a flurry of last-minute imports and consumer stockpiling as businesses braced for higher costs.

Higher Costs for Goods (Inflation Trigger)

Tariffs raise prices on imported goods. Domestic suppliers often follow, increasing prices across the board. This leads to cost-push inflation — prices rise due to higher production costs, not increased demand.

• Real-time signs:
  • Spot truck rates are rising across all equipment types.
  • Computer and cellphone imports — major cost inputs — have surged ahead of tariff deadlines, suggesting inflationary pressures ahead.

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Trade Disruption + Supply Chain Distortion

Companies are front-loading inventory to beat tariffs, but that behavior isn't sustainable.

• Short-term gain, long-term pain: Pull-forward activity might temporarily boost trucking volumes and rail carload growth but will likely drop off as prices rise and demand retracts.
• Retaliatory tariffs are set to shrink export markets.
• ISM Manufacturing Index fell back into contraction territory (49.0%), especially in freight-sensitive sectors.

Slowing Economic Growth

While March job gains were solid (+228,000), several warning signs are flashing:

• Unemployment ticked up to 4.2%, the highest since 2021.
• Ongoing jobless claims hit their highest since late 2021.
• Job openings fell to 7.6 million, down 10% from a year ago.
• Consumer demand and capital investment remain volatile.

The Stagflation Trap

All three ingredients are now visible:

• Inflation: Tariffs and rising freight costs fuel price increases.
• Stagnation: Manufacturing and trade data signal economic cooling.
• Unemployment: Though still modest, indicators are heading the wrong direction.

It is possible that at some point the Fed will face a dilemma: raise rates to tame inflation and risk recession, or ease rates and risk even worse inflation.

Key Takeaway

Tariffs can spark inflation while dampening economic growth, creating a policy trap with no easy exit. Aggressive use of tariffs risks tipping the balance toward stagflation — a scenario that is incredibly difficult to reverse with traditional tools.

Stay tuned. We’ll keep decoding the data so you don’t have to.