U.S. Policy Volatility Fuels Global Economic Turmoil Amid Rising Stagflation Fears
July 14, 2025
Despite efforts by other nations to shield themselves, no country currently matches the U.S. in wealth and global influence, though some are seeking greater self-insurance.
Long-standing assumptions about the U.S. economy are being challenged, with consumer and producer confidence plunging and inflation expectations reaching levels not seen since 1981.
Given the U.S.'s central role in global markets, its instability could trigger stagflation elsewhere, amplifying the worldwide economic risks.
The current economic instability makes traditional investment correlations unreliable, complicating asset allocation for businesses and investors.
Decision-makers must build resilience by diversifying investments, enhancing operational flexibility, and preparing for a fragmented global economy to navigate these uncertainties effectively.
The global economy is currently in turmoil, largely driven by U.S. policy volatility following recent elections, creating significant uncertainty for investors and policymakers worldwide.
Uncertainty surrounds U.S. trade policies, the Federal Reserve's role, and tariffs, all of which are complicating global economic stability and influencing capital flows and inflation.
Experts present two contrasting scenarios for the U.S.: one where reforms lead to a stronger economy reminiscent of the Reagan era, and another where it risks slipping into stagflation similar to the Carter era.
The future of the U.S. economy hinges on whether it can restructure towards a more efficient private sector and fairer global trade or descend into stagflation, risking recession and financial instability.
The economic outlook remains highly fluid, with market indicators fluctuating rapidly and probabilities of positive or negative outcomes shifting accordingly.
Navigating this uncertain landscape requires bold, creative leadership and adaptability from governments, companies, and investors to effectively address upcoming challenges.
In response to U.S. policy volatility, Europe is working to strengthen its economic ties with other regions, while China aims to position itself as a more reliable economic power.
The U.S. is exhibiting characteristics of a developing nation, with rising tariffs, increasing deficits, capital outflows, and concerns over the independence of its central bank.
Summary based on 2 sources
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Sources

Foreign Affairs Magazine • Jul 14, 2025
Is America Breaking the Global Economy? What an Age of Economic Uncertainty Will Mean for the World
Foreign Affairs Magazine • Jul 14, 2025
Is America Breaking the Global Economy? What an Age of Economic Uncertainty Will Mean for the World