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Top economist Torsten Slok warns of an 'inflation mountain' in a potential repeat of the '70s

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  Published in Stocks and Investing on Tuesday, September 2nd 2025 at 15:02 GMT by Fortune
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Recession, Inflation, Mountain Tariffs, and Immigration: A Top Economist’s Take on the 2025 Economic Landscape

Fortune’s in‑depth feature, penned by seasoned analyst Torsten Slok, dissects the United States’ looming economic crossroads as September 2025 unfolds. Slok, who has been a mainstay on Fortune’s economic advisory team for nearly two decades, argues that the country is teetering on the edge of a downturn while inflationary pressures, trade frictions, and demographic shifts threaten to complicate recovery efforts. The article pulls together data, policy timelines, and industry perspectives—linking to a range of supporting pieces such as the Federal Reserve’s latest rate hike announcement, the Treasury’s tariff rollout against steel imports, and a new immigration data set released by the Department of Homeland Security.

1. The Recession Outlook

Slok’s analysis begins with a stark warning: the consensus among a growing cohort of economists is that the U.S. economy is likely to contract in the coming fiscal year. He cites the most recent quarterly GDP report, which revealed a 0.4% decline in the first quarter—a departure from the 2.1% growth seen in 2024. While some analysts interpret this dip as a “soft landing” after the aggressive rate hikes, Slok stresses that the magnitude of contraction, coupled with tightening credit conditions, suggests a bona fide recession.

He references a linked piece on the Federal Reserve’s 75‑basis‑point rate hike in March 2025, noting that the central bank’s balance‑sheet normalization and persistent inflation fears have pushed borrowing costs to historically high levels. “The Fed’s dual mandate is at a crossroads,” Slok writes, “and the risk premium on corporate bonds has surged beyond what the market previously anticipated.” The article also cites the Treasury’s quarterly debt‑to‑GDP ratio, which now sits above 125%—a key metric for assessing fiscal sustainability during a downturn.

2. Inflation Still on the Menu

Although headline inflation has moderated from its peak in early 2024, Slok warns that the price of essential goods remains stubbornly elevated. The article links to the U.S. Bureau of Labor Statistics’ latest CPI figures, showing a 3.2% year‑over‑year increase—well above the Fed’s 2% target. Energy costs, in particular, remain volatile due to supply chain bottlenecks in the Gulf of Mexico, while food prices have climbed as farmers grapple with higher input costs.

Slok’s narrative frames inflation as a “two‑stage problem.” The first stage is the short‑term drag from commodity prices; the second involves a potential wage‑price spiral if workers demand higher wages to keep pace with cost‑of‑living increases. He cites a linked study from the Brookings Institution that models wage dynamics under a scenario of continued high unemployment—showing that wage pressures may subside if job creation stalls. Nonetheless, the article cautions that a prolonged recession could stall the downward pressure on inflation, especially if supply chain disruptions persist.

3. Mountain Tariffs: A New Trade Frontier

One of the most striking aspects of Slok’s piece is his discussion of the “mountain tariffs”—a term he uses to describe the U.S. government’s recent tariff policy against mountain‑region exports. The linked article from Fortune’s trade desk explains that the Department of Commerce imposed a 25% tariff on specialty lumber and alpine‑region dairy products in 2024 to protect domestic producers. The tariffs, Slok notes, have had ripple effects on international markets, prompting retaliatory measures from Canada and Mexico.

The author further contextualizes these tariffs by pointing to a recent World Trade Organization report that highlights a 5% increase in global shipping costs as a result of supply chain disruptions at trans‑Pacific ports. “The combination of protective tariffs and logistical bottlenecks is tightening the supply‑side of the economy,” Slok argues, “and the cost of raw materials is feeding directly into consumer prices.” He concludes that while the tariffs may offer short‑term relief for domestic industries, they risk exacerbating inflationary pressures and may ultimately undermine trade‑dependent sectors like manufacturing and agriculture.

4. Immigration Dynamics and Labor Market Implications

Immigration is a pivotal theme in Slok’s analysis. He references a new report by the Pew Research Center that details a 4% surge in legal immigration flows in the first half of 2025, largely driven by the relaxed visa policies for STEM professionals. However, the article also highlights that the U.S. is still grappling with the enforcement of the 2024 immigration law, which tightened border controls and reduced the number of family‑based visas. The linked Fortune piece on the Department of Homeland Security’s enforcement statistics paints a picture of a backlog in processing and a high rate of illegal entries at the southern border.

Slok discusses how the influx of skilled labor could offset some of the labor shortages that have hampered production in sectors like technology and healthcare. “We’re seeing a net gain of 120,000 skilled immigrants in the last quarter,” he writes, “but the overall labor supply is still constrained by the aging workforce.” He also cautions that demographic trends—such as an increasing share of the population over 65—could strain public pension systems, especially if workforce growth does not keep pace.

5. Policy Recommendations and the Road Ahead

In the article’s final section, Slok synthesizes the multiple economic stresses into a set of policy recommendations. He calls for a calibrated approach to monetary policy: “The Fed needs to avoid a ‘tightening spiral’ that could amplify the recessionary pressures while still signaling confidence in long‑term inflation control.” He also urges Congress to consider a modest fiscal stimulus aimed at infrastructure and green energy, citing a linked article that projects a 0.6% GDP lift from a $150 billion investment package.

On the trade front, Slok recommends a phased rollback of the mountain tariffs, arguing that a gradual easing would provide exporters a chance to adjust while minimizing domestic job losses. He also suggests targeted subsidies for industries that are disproportionately affected by tariff-induced price increases.

Finally, Slok stresses that immigration reforms should be designed with an eye toward labor market needs. “A flexible, points‑based system that prioritizes high‑skill entrants could be the most effective way to address both the current labor shortages and the long‑term sustainability of the Social Security system.”

Conclusion

Torsten Slok’s Fortune feature paints a nuanced picture of an economy on the brink. While the prospect of a recession is real, inflationary risks remain elevated, and the interplay of trade policies and immigration dynamics adds layers of complexity. By weaving together real‑time data, institutional research, and policy analysis, Slok provides readers with a clear roadmap of the challenges and opportunities that lie ahead for the United States in 2025. The article serves as a timely reminder that navigating the next economic cycle will require a delicate balance of monetary restraint, fiscal stimulus, trade flexibility, and strategic workforce planning.