Top economist warns: US faces a crisis worse than recession — here's what could be coming
The US economy may be headed for something more dangerous than a typical downturn, and a top Wall Street economist has also shared his prediction for the US economy in its current condition, as per a report.
Apollo Global Management chief economist
Torsten Sløk
has warned that America is on the verge of a critical inflection point for stagflation, a situation where inflation remains elevated while growth decelerates — something that's particularly challenging to address, according to a Business Insider report. It's different from a typical recession, as
stagflation
renders the Federal Reserve powerless, making it more difficult to reduce interest rates without further exacerbating inflation, as per the report.
Sløk pointed out in a white paper that this economic condition has largely been triggered by US president Donald Trump's tariffs, reported Business Insider.
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He explained that, "Tariff hikes are typically stagflationary shocks — they simultaneously increase the probability of an economic slowdown while putting upward pressure on prices," as quoted in the report. The economist also added that consensus forecasts on Wall Street for economic growth have drifted lower this year, while inflation forecasts have edged higher, as reported by Busienss Insider.
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Here's what he's forecasting for in the coming months and why it's important for you.
1. GDP growth may be halved
Sløk anticipates the economy to slow sharply, and this year the GDP growth may plummet to as low as 1.2%, which is less than half the record 3.1% expansion that occurred in the third quarter of 2024, according to the report.
The Bureau of Economic Analysis has estimated that the American economy has already contracted by 0.3% in the first quarter of 2025, which is the first decline since 2022, as reported by Business Insider.
2. Inflation is likely to stay high
Apollo now forecasts inflation to be around 3% by the end of 2025, which is well above the company's previous estimate of 2.4%, prior to Trump's tariffs announcement in April, as per the report.
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3. Unemployment will continue to increase
The labor market is expected to slow down over time for at least the next 18 months, according to Business Insider. Apollo has projected that unemployment could increase from 4.2% currently to 4.4% in 2025 and further jump up to 5% or higher in 2026, as per the report.
4. A recession is still in the cards
Apollo has projected that the possibility of a recession over the next 12 months in the United States is at 25%, as reported by Business Insider. Sløk pointed out that before Trump's tariffs, the company was not even anticipating a recession at all this year, according to the report.
Sløk even warned that now there is still a risk that the US economy could enter a recession as soon as this summer, referring to his "voluntary trade reset recession" thesis he first floated as tariffs swung into effect earlier this year, as reported by Business Insider.
His explanation is that the US economy will enter a recession this summer due to tariffs because of shipments to US ports, and trucking demand will slow down, which will lead to empty shelves and lower sales for firms, as reported by Business Insider.
FAQs
What's causing this potential stagflation?
According to Sløk, it's mostly being driven by President Donald Trump's tariffs, which make imported goods more expensive and can hurt businesses.
How bad could the US economy get?
Sløk thinks GDP growth, basically how much the economy grows, could be cut in half this year, dropping to just 1.2%.
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