Could the dreaded economic phenomenon of stagflation make a dramatic comeback in 2026? Financial commentator John De Goey warns that a combination of tariffs, persistent inflation, and concerning jobs data is setting the stage for a potential crisis. While some believe the threat has passed, De Goey argues its impacts may arrive later than initially feared, yet sooner than the public currently anticipates.
The Ghost of the 1970s Returns
The term "stagflation" describes a rare and painful economic condition where stagnant growth, high unemployment, and high inflation occur simultaneously. It has been roughly five decades since North America last experienced this scenario during the 1970s, triggered by oil price shocks. Today, De Goey suggests the catalyst could be different: an "own goal" stemming from trade policies. He points to the economic strategies of a mercantilist U.S. president, whose tariffs—initially mitigated by stockpiling—threaten to drive up prices and reduce employment. The political gambit, he notes, may be to secure external benefits before the internal costs peak, likely aiming for a timeline before the United States' November mid-term elections.
Warning Signs on the Canadian Horizon
Several indicators are flashing yellow for Canada's economic health. First, economic growth has slowed to a crawl. Recent data shows a drop in Canada's GDP, signaling decelerating activity. While U.S. GDP saw a rise in the third quarter, both nations face long-term demographic challenges from slowing immigration and aging populations, creating persistent headwinds.
Compounding this is declining business investment in Canada, fueled by uncertainty from the ongoing U.S. trade war initiated under President Donald Trump. This uncertainty chills the very investments needed for growth.
The Inflation and Employment Puzzle
On the inflation front, the picture is mixed but worrying. While prices for many discretionary items have held steady, groceries have seen significant inflation. Because food is a frequent, essential purchase, Canadians feel these price hikes acutely and in real time.
The pandemic introduced the world to supply chain disruptions. Now, new disruptions are emerging as companies scramble to outsource suppliers to avoid punitive tariffs. Finding alternative suppliers often leads to delays and compromises in quality, which continue to exert upward pressure on prices.
The final piece of the stagflation trifecta is unemployment. Notably, Canada has so far avoided the rising unemployment rates seen in the United States, partly due to nationalistic policies and government intervention. However, De Goey cautions that these measures have limits. If the global economy slows due to inescapable macroeconomic forces, Canada will not remain immune, and job losses could follow.
The convergence of these factors—sluggish growth, persistent inflationary pressures particularly in essentials, and the looming threat to the job market—paints a concerning picture for 2026. The economic comfort of the past decades may be challenged by a return of the stagnant, high-cost environment not seen since the era of disco and bell-bottoms.
