Inflation appeared nearly defeated just months ago, but recent price hikes have reignited concerns among American consumers. Rising costs, particularly for essentials like eggs and fuel, have turned the public’s gaze toward former President Donald Trump, who had promised to tackle inflation aggressively. Instead of fulfilling this promise, Trump has focused his economic policies on tariffs—essentially higher taxes—that increase costs for consumers.
Tariffs, fees imposed on imported goods, are paid by American importers who typically pass these costs onto retailers. Consequently, consumers are left to contend with higher prices at the checkout. With many feeling the pinch, Americans are growing increasingly skeptical of Trump's economic approach. Chris Rupkey, chief economist at FWDBonds, noted, "The public’s fears have soared... showing the blizzard of changes coming from the president’s desk have spilled over the line between pro-growth...into the realms of pro-inflation."
Reflecting this mounting anxiety, the University of Michigan’s latest consumer sentiment survey revealed a 10% drop from January to February. Alarmingly, nearly two-thirds of U.S. adults surveyed feel Trump isn’t adequately addressing inflation issues. This consumer pessimism is also manifesting on Wall Street; the stock market recently experienced its worst week during Trump’s presidency, with the Dow plunging by 1,200 points.
It is important to put this latest inflation issue within the broader scope of economic conditions. While recent consumer inflation reports show prices climbed 0.5% last month—the fastest increase since August—Trump can’t be held wholly responsible. His presidency covered just 11 out of 31 days referenced in this report. Yet, inflation is becoming increasingly associated with Trump, as fears of rising prices threaten to disrupt consumer spending, which constitutes over two-thirds of the U.S. economy. Rupkey warned, "If the consumer balks at the higher prices coming their way, the economy could collapse in a hurry."
Consumers' concerns are likely to intensify with the introduction of even more tariffs. Currently, Trump has imposed a 10% tariff on Chinese goods, aimed at generating revenue and restoring American manufacturing. Apple is making substantial investments to mitigate these costs, pledging $500 billion for U.S. facilities. But not every company can make such commitments, particularly those reliant on low-cost production abroad.
Trump is expected to impose new tariffs next month on Canadian and Mexican goods, which could potentially endanger the free trade policies enacted during his first term. A potential increase of tariffs by 25% on imports may significantly impact prices for everyday goods, including cars—horizontal and basic necessities like food and clothing. Both Canada and Mexico have already signaled their readiness to retaliate.
These new proposed tariffs may exacerbate existing economic divides. Michael Pearce, deputy chief U.S. economist at Oxford Economics, warned, "Because low-income consumers spend a disproportionate share of their income on non-discretionary goods, the increased consumer prices due to tariffs will weigh more heavily on them." Meanwhile, prices for other significant commodities, like microchips and lumber—which are integral to maintaining housing supply—are likely to rise, putting additional strain on consumers.
Trump acknowledges the inflation concern but has taken to attributing it to his successor. During recent interviews, he stated, "Inflation is back... I had nothing to do with it." While opinions diverge on why inflation surged after Trump’s departure from office, it is clear these issues have persisted due to factors like rising egg prices driven by bird flu, other sanctions, and fluctuated consumer demand.
The Trump administration has presented its strategy for addressing these inflationary pressures, highlighting tax cuts, government spending cuts, and deregulation of the energy sector. Although these strategies are well-meaning, experts voice skepticism; tax cuts may induce higher borrowing, potentially failing to compensate for lost revenue resulting from reduced taxation.
Further complicity arises from concerns over government spending cuts, which, if mismanaged, could reignite inflation as there's potential for consumers to spend the 'savings' from government rebates immediately. Kevin Hassett, one of Trump’s economic advisors, argues against these sentiments, claiming taxpayers would rather bolster their savings.
Unfortunately, Trump’s approach is facing significant backlash already. The threat posed by sustained tariffs looms large as American families brace themselves for what might come next.
But in Trump’s plans, there's little detail on how he intends to address the most acute inflation problems. Instead, the narrative seems to shift blame to external factors, all the meanwhile denying accountability for his administration’s policies which are increasingly viewed as detrimental.
With the reality of inflation looming and consumer trust waning, Trump’s political capital could erode if his proposed solutions don't resonate or demonstrate effectiveness before it’s too late. For now, it appears his policies may not only contribute to more inflation but could also threaten to unravel the economic stability he promised to protect.