Top Economist: 2025 Was a Miserable Year for You Amid Tariff-Fueled Inflation, Iran War Will Make Things Even Worse

(SeaPRwire) –   “This will indeed be America’s golden age,” President Donald Trump declared on April 2, 2025, observed as Liberation Day. On this occasion, the president praised tariffs as a means to “make America wealthy again.” American investors saw their wealth decline by approximately 10% as the market experienced one of the most severe short-term crashes in recent history, with the Dow Jones Industrial Average losing nearly 4,600 points, a 11% drop over four days. The tariff policy was initially rescinded, then gradually reinstated, and subsequently declared unlawful, yet tariffs consistently contributed to inflation.

According to Mark Zandi, this was merely the prelude. “The elevated energy and other commodity prices resulting from the war pose a threat of causing even greater economic damage than the tariffs, further hindering growth and exacerbating inflation,” the chief economist at Moody’s Analytics stated in a post on X.

Americans are confronting a multitude of economic challenges. Many employers have halted hiring, adopting a cautious approach due to Trump’s tariffs. A growing number of technology companies have reduced their workforce following the integration of AI. Inflation also remains difficult to control; while it has decreased from a peak of 9.1% in July 2022, it persists above pre-pandemic levels. Although many economists anticipated that the tariff-related economic pressures would ease by the beginning of 2026, the conflict in Iran has disrupted these expectations. Inflation is now trending upward due to the energy shock stemming from the war. Zandi predicts that job growth will stagnate, creating a detrimental combination of increased inflation and sluggish economic expansion.

This combination has led some economists to cautiously mention the dreaded term: stagflation, a term economists use to describe a severe mix of stagnant growth and persistent inflation. This situation arises as the Strait of Hormuz remains under a dual blockade, and a resolution to the conflict appears increasingly distant, especially after hostilities briefly reignited on Monday.

Moody’s Forecast on the War’s Impact on the U.S.

While the Supreme Court invalidated Trump’s tariffs imposed under the International Emergency Economic Powers Act, the president reintroduced tariffs under Section 232, which are intended to safeguard U.S. national security. A March report from the nonpartisan Tax Foundation indicated that these tariffs, though less extensive than those enacted under IEEPA, will reduce long-run GDP by 0.2% and result in the loss of 154,000 jobs.

Zandi, who has warned about the recessionary implications of the conflict for the U.S. since its inception, reiterated his concerns. In a recent LinkedIn post, the Moody’s economist stated that while the U.S. should avoid a recession, he anticipates further economic contraction even if the war concludes in the coming weeks.

“The economy should avoid a recession, but growth will fall well short of potential, jobs will remain largely flat, and unemployment will drift higher,” he commented.

According to Zandi, higher fuel prices will permeate the broader economy. Increased energy costs are expected to drive up the prices of delivery services, air travel, and food in the upcoming months. Furthermore, a recent note from Goldman Sachs suggests that the U.S. could begin to experience a shortage of jet fuel by July, potentially leading airlines to significantly reduce flights, similar to actions already taken by some European carriers.

Although Zandi indicated in his note that he expects the economy to avoid a recession, Moody’s recession probability reached 49% in March. Similarly, Goldman Sachs forecasts a 30% risk of recession, and EY-Parthenon places the odds at 40%.

While Zandi asserts that the war will negatively affect the labor market, it is not entirely clear if it will impact hiring. Bloomberg reported that forecasters anticipate the April jobs report, due on Friday, to show an addition of approximately 62,000 jobs, with private-sector hiring expected to be even stronger, according to a survey of economists conducted by *Bloomberg*. This follows the positive momentum from the better-than-expected March jobs report, which saw employers add 178,000 jobs and the unemployment rate decrease to 4.3%.

Nevertheless, Zandi remains skeptical about the U.S. economy’s capacity to withstand the economic repercussions emanating from the Strait of Hormuz.

“The U.S. economy is resilient,” he stated, “but just how resilient is set to be tested.”