Adam Posen: Many forecasters and investors misinterpret the state of the American economy due to a fundamental misunderstanding of how government-induced uncertainty affects it.
The effects of President Donald Trump’s trade and immigration policies, such as tariffs and deportations, are expected to become more evident in 2026, leading to stagflationary effects and inflationary pressures.
The uncertainty caused by Trump’s policies has delayed decision-making by businesses, households, and investors, but as this uncertainty is resolved, shortages and inflation are expected to rise, potentially forcing employers to raise wages and adding to inflationary pressures…