JP Morgan & Co. chief executive officer Jamie Dimon sounded a warning for the US economy, as he flagged stagflation risk amid multiple challenges like geopolitics, deficits and price pressures.

Speaking at JPMorgan’s Global China Summit in Shanghai, Dimon rejected the idea that the US economy is currently in a “sweet spot.”

Stagflation is an economic situation where a country suffers from high inflation combined with high unemployment and stagnant demand in a country’s economy, all at the same time. This also creates difficulties for the policymakers.

Fed rate pause

Against the backdrop of stagflation risk and economic uncertainty amid the tariff war, Dimon also praised the US Federal Reserve’s cautious approach of holding interest rates steady.

Trump’s back-and-forth tariff announcements have raised concerns about trade, inflation, unemployment and a potential recession.

Fed officials have paused rate hikes this year, balancing a strong economic backdrop against risks from policy changes such as tariffs. They have signalled growing concerns about the dual threat of higher inflation combined with rising unemployment.

Earlier this month, the US and China agreed to sharply reduce tariffs for 90 days to hammer out a new agreement, in what promises to be difficult rounds of talks between Washington and Beijing. US President Donald Trump’s tariffs on China will likely remain at a level expected to severely curtail Chinese exports after the 90-day truce, analysts and investors say.

Commenting on the trade truce between the US and China, Dimon said, “I don’t think the American government wants to leave China.” “I hope they have a second round, third round or fourth round, and hopefully it will end up in a good place.”

In his earlier comments, Dimon emphasised the need for vigilance, noting that the full effects of tariffs remain unclear and recession risks persist.

Rising US deficit

Additionally, amid a Moody’s credit downgrade of the United States’ sovereign rating amid rising national debt, Dimon said the US has to “attack the deficit problems,” and he also understands why investors may be cutting US dollar assets.

“I don’t worry about short-term fluctuations in the dollar,” Dimon said. “But I do understand people might be reducing dollar assets.”

(With inputs from Bloomberg)

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