While consumers might perk up at the idea of lower prices, deflation<\/a> is often thought to be a more difficult problem for policymakers to solve than high inflation. The Fed can raise interest rates to combat higher prices, but, in the case of deflation, central bankers can only lower interest rates<\/a> until they hit 0% before needing to turn to other options to boost the economy.<\/p>\n That’s one reason why countries like Japan<\/a> and China<\/a>, which have been slammed with deflation crises in the past, have seen their economists mired in long periods of anemic growth in the years that followed. <\/p>\n The US could be facing a similar fate, Rosenberg said, adding that he believed America was “following the footsteps” of those two nations in particular.<\/p>\n “We are now staring down the barrel of a deflationary<\/a> shock, and it amazes me how all the bond bears, inflation-phobes, and Fed policy hawks are missing this secular shift as they continue to play by the old rules,” Rosenberg wrote in a report on Wednesday.<\/p>\n He sees three reasons the US is headed for an era of deflation.<\/p>\n Related stories<\/p>\n Business Insider tells the innovative stories you want to know<\/p>\n Business Insider tells the innovative stories you want to know<\/p>\n Tariffs could actually be deflationary<\/p>\n President Donald Trump’s tariffs could actually have a deflationary effect over the long-term as consumers rein in spending, Rosenberg said.<\/p>\n Demetrius Freeman\/The Washington Post\/Getty Images<\/p>\n Tariffs are thought by economists to be inflationary<\/a>, as companies can pass along the cost of import duties by raising prices for consumers.<\/p>\n But there’s also a deflationary aspect to tariffs: Higher prices cause consumers to spend less<\/a>, which could lower prices as demand falls relative to supply, Rosenberg said.<\/p>\n There are already signs that consumers are beginning to tighten their belts. While inflation rose to 2.7% in July, retail sales have been pretty weak, growing 0.6% in June after a 0.9% contraction in May, according to US Census Bureau data. July is expected to show retail sales grew 0.5%. <\/p>\n “GDP is, after all, only about spending,” Rosenberg said, referring to how consumer spending<\/a> accounts for around two-thirds of GDP growth in the US.<\/p>\n Trump’s immigration crackdown could hit growth<\/p>\n Trump’s immigration crackdown will slow population growth, another headwind to the US economy, Rosenberg said.<\/p>\n \u00a9 Immigration and Customs Enforcement\/AFP Charles Reed<\/p>\n Slower spending among Americans could collide with the near-term impact of President Donald Trump’s immigration policies<\/a>. Reduced immigration is likely to result in less consumer spending, another factor that will lower prices and hurt economic growth, Rosenberg said.<\/p>\n Immigration flows<\/a> have already started to drop, with new entrance visas to the US plunging 20.5% in May, he said.<\/p>\n Meanwhile, Rosenberg added that most\u00a0immigrants in the US<\/a>\u00a0are between the ages of 35 and 54, the age range where spending tends to peak in a lifecycle.<\/p>\n “In the final analysis, the demand destruction coming from the trade file, along with lower growth in future spending due to a reduced immigrant consumer base, should lead to lower inflation,” he wrote.<\/p>\n “Every young immigrant household not allowed into the US accelerates the aging consumption cliff that lies around the bend,” Rosenberg added.<\/p>\n An aging population will be a drag on spending<\/p>\n Older Americans tend to save more than they spend, which could hit economic growth, Rosenberg said.<\/p>\n Associated Press<\/p>\n Those factors are exacerbated by the fact that America’s population is rapidly growing older, and people aren’t having as many kids<\/a> as they used to.<\/p>\n According to the latest projections from the US Census, the number of Americans 65 and older is expected to soar to 82 million by 2050, up 47% from 2022 levels.<\/p>\n<\/p>\n An aging population<\/a> can hit economic growth, given that older Americans tend to save more than they spend. The change in someone’s likelihood to consume drops from 0.94 at age 35 to around 0.67 at age 65, per Rosenberg’s analysis.<\/p>\n “The fact that this is happening in such a highly leveraged economy is only going to exacerbate the deflationary trendline in the not-too-distant future,” Rosenberg said, referring to high debt levels in the US<\/a> that could limit the government’s ability to spend on other things to stimulate the economy. <\/p>\n![\"\"\/](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2025\/08\/1754989098_269_placeholder.png\")
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