In a recent Opinion column on MarketWatch, economist Stephen Roach warns that the “America First” protectionist policies promoted by former President Donald Trump could push the United States into a sustained period of stagflation — the harmful combination of sluggish economic growth and elevated inflation.
Roach distinguishes between the temporary supply-chain disruptions seen during the COVID-19 pandemic and a more lasting policy-driven decoupling from global trade networks. Unlike short-lived logistical setbacks, protectionist measures aimed at reducing economic ties with major trading partners — notably China, and potentially parts of North America — would reshape the fundamentals of global production.
One important consequence of reversing decades of supply-chain integration is the loss of efficiency gains that have helped restrain consumer prices. Over the last decade, improved trade links, global sourcing and just-in-time manufacturing contributed to roughly a 0.5 percentage point reduction in annual inflation. If the United States systematically retreats from these efficiencies, that built-in disinflationary force could vanish.
Shifting manufacturing back to the U.S. — often called reshoring or onshoring — is not an overnight fix. Establishing modern production platforms requires sustained investment, new supplier networks, skilled labor, and time. Facilities must be planned, built and tested; workforces must be trained; and upstream suppliers must be coordinated. All of that typically takes several years, during which costs may rise and output may lag.
Moreover, policy uncertainty can further undermine private investment. Businesses weighing whether to build plants domestically or abroad are sensitive to tax incentives, trade rules, and the predictability of regulatory regimes. Frequent changes in trade policy or ambiguous signals about the long-term direction of economic strategy can lead firms to delay projects or abandon them altogether, reducing investment and potential job creation.
The combined effect of higher production costs from less efficient supply chains and weaker investment due to policy uncertainty could produce slower growth and stubborn inflation — the very definition of stagflation. Consumers could face higher prices for goods that previously benefited from global competition, while the labor market may not generate enough productive employment to restore robust growth.
Roach’s analysis highlights a policy trade-off: the desire to strengthen domestic manufacturing and reduce reliance on strategic rivals versus the economic costs of dismantling well-established global production systems. While some degree of diversification and targeted industrial policy may be warranted for national security reasons, a wholesale and rapid decoupling risks eliminating the cost advantages that helped keep inflation lower over the past decade.
In short, a deliberate move toward protectionism and decoupling could leave the U.S. economy worse off in the medium term — facing slower expansion and higher inflation — unless policymakers carefully balance strategic goals with the economic realities of global supply chains and the time required to rebuild domestic capacity.