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Markets may be trying to figure out the impact of a full-on Trump trade war with Europe, China, Canada, and Mexico.

But one prominent economist says the eventual outcome could be singular. 

Apollo Global Management (APO) chief economist Torsten Sløk told me on Yahoo Finance's Opening Bid that a full-scale US trade war against the world would deliver a "stagflationary shock" to the US economy. Stagflation is defined as a period of slow growth and high inflation. It's a tariff-related warning also recently issued on Opening Bid by billionaire investor Ray Dalio. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)

"So the short-run effects of a trade war [are] certainly painful. Even this might be small numbers, but it's certainly something that's negative," Sløk said on Monday (see video above; listen below).

President Trump has been wielding his tariff pen in his second White House stint. 

Trump said Sunday en route to the Super Bowl that the administration would levy a 25% tariff on all imported steel starting Monday.

Last Tuesday, the president imposed a 10% tariff on all Chinese imports on top of existing tariffs on the country. China retaliated, placing tariffs on select chips and metals. It also began investigating Google (GOOG) and blacklisted US apparel brands Calvin Klein and Tommy Hilfiger, operated by PVH Corp. (PVH).  

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Trump recently agreed to pause tariffs on Canada and Mexico for 30 days.

The potential impact of tariffs varies.

The Tax Foundation estimated tariffs on Mexico, Canada, and China could collectively shrink US GDP by 0.4%. They would create a tax of more than $800 per US household in 2025.  

Read more: What are tariffs, and how do they affect you?

EY chief economist Greg Daco estimated US GDP would contract by 1.5% in 2025 and 2.1% in 2026 if the tariffs kick in, as they would "dampen" consumer spending and business investment. Inflation would rise by about 0.7% in the first quarter, Daco projected.

Thus far, the markets have taken the chaotic dance on tariffs somewhat in stride. 

The S&P 500 (^GSPC), Nasdaq Composite (^IXIC), and Dow Jones Industrial Average (^DJI) are still hovering around record highs. "Magnificent Seven" go-to Meta (META) has notched a stellar 15 straight session of gains. 

But pros say investors need to take tariff risk more seriously. 

Every 5-percentage-point increase in the US tariff rate is estimated to reduce S&P 500 earnings per share by roughly 1% to 2%, Goldman Sachs chief US equity strategist David Kostin wrote in a Feb. 7 note.

"As well as potentially hitting earnings, tariffs could impact US stocks by causing greater uncertainty," Kostin warned.

Sløk is surprised the market has stayed so resilient. 

It reflects full-scale tariffs not yet being implemented, he reasoned. 

"We try to, of course, understand why is it that the markets have been trading still in such a positive way despite some of this fairly disruptive news we've had in the last two weeks," Sløk said. "I think that there's a lot of discussion around how much we will actually see, what will the magnitude be, which countries will be hit."

"We should wait maybe 30 days to therefore figure out if this actually becomes law or if this actually is something that will be implemented or not."

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Three times each week, I field insight-filled conversations and chats with the biggest names in business and markets on Opening Bid. You can find more episodes on our video hub or watch on your preferred streaming service.

Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.

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