Jennifer Taylor

Thu, May 29, 2025, 2:01 PM4 min read

With everything happening in the economy lately, inflation is almost definitely on your radar, but you might not be aware of stagflation. In a recent TikTok, “Your Rich BFF” Vivian Tu highlighted this financial concept and why you need to know about it.

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Referring to stagflation as “inflation’s scary older brother,” Tu said you need to understand how this concept works if you want to be prepared for a recession.

Tu listed the “three ingredients in a stagflation cocktail”: high inflation, a stagnant economy and high unemployment.

Sarah Maitre, CFA, CFP, founder and financial planner at Camriel Advisors, added that stagflation occurs when the economy slows down, but prices keep rising.

“It’s one of the worst combos out there, because your paycheck doesn’t go as far, and you’re not likely to get a raise to keep up,” she said. “We haven’t seen full-blown stagflation in decades — the 1970s were the last major example — but there are signs we could be heading in that direction.”

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Although President Donald Trump’s high tariffs have been declared unlawful by the Court of International Trade — judges said the president does not have the authority to impose tariffs; that is a power of Congress — the trade war may still just be beginning, and it’s unclear how other countries will respond. The long-term economic effects have yet to be seen.

Before the court ruling, companies were warning consumers about price increases due to the tariffs.

“Walmart, for example, said it [expected] to raise prices, which sparked backlash from Trump, who thinks businesses should absorb the costs,” Maitre said. “But for a lot of companies, that’s just not realistic.”

If businesses are already operating on tight margins, she said the extra costs will likely be absorbed by consumers. The Trump administration is already pushing back in an attempt to impose the tariffs, The Wall Street Journal reported, but it is unclear now as to what they will look like, in the end.

As for economic growth, Maitre said the outlook is currently bleak.

“Job creation has slowed, and unless we see a big push to build or produce more here at home, that probably won’t change,” she said. “Some global investors are also pulling money out of the U.S., which adds even more uncertainty.”