Inflation would be tamed, if not for Trump
The Iran war and needless tariffs are the only things pushing prices higher, at this point.
President Trump had the gift of lucky timing when he took office last year. And he’s completely blown it.
Trump should be bragging about the demise of inflation and campaign promises kept. While campaigning in 2024, he told voters he’d get prices down. Prices should be down, or at least flat. Virtually all of the price pressures that pushed inflation to 40-year highs during the Biden administration are gone.
But now there are new price pressures, courtesy of Trump himself. The inflation rate jumped from 3.3% in March to 3.8% in April, driven by the surge in energy prices resulting from Iran’s closure of the Strait of Hormuz. A year earlier, inflation was just 2.3%.
Trumpflation began with the tariffs Trump started imposing last year. Courts have struck down many of them, but the average import tax has still jumped from 2.4% when Trump took office to about 10% now.
The Trump tariffs have kept the cost of clothing, appliances, furniture, electronics and many other things higher than they’d otherwise be. They’ve helped push coffee and beef inflation into double digits. Trump insists tariffs aren’t inflationary, yet he’s planning to reduce beef tariffs to address high prices—a tacit admission that his own policies are costing people money.
The Iran war that Trump launched on February 28 is shaping up as the dumbest move by a president in decades, maybe since Herbert Hoover’s tariffs intensified the Great Depression in the early 1930s. Iran’s de facto closure of the Strait of Hormuz has sent oil and gasoline prices to the highest levels since 2022, the year inflation hit a 40-year high of 9% and gasoline prices hit $5 per gallon for the first time ever.
Everybody knows high energy prices are straining American budgets anew. What gets less attention is where inflation has subsided. Here, for example, are some of the major spending categories where inflation has dropped, paired with energy-related spikes.
The year-over-year change in rents has fallen from 8.8% in 2023 to just 2.8% now. Food inflation is less than half what it was three years ago. Car insurance premiums soared for a couple of years, but are now flat. Consumers would rather see falling prices, instead of smaller price increases. But low inflation still allows people to get ahead, as long as incomes rise by more than prices.
If Trump had imposed no new tariffs and left Iran alone, many Americans would have regained the ground they lost to inflation during the Biden years. The psychological scars of price shocks would be fading or gone.
Instead, prices are rising by more than incomes for the first time since 2022. When real income turns negative, as it probably is now, the typical American is falling behind, by definition. And there is probably worse inflation to come, as rising transportation and production costs work their way through supply chains, all the way to consumers.
Inflation comes with other costs not quite as visible as the gas prices plastered on billboards at every filling station in America. Inflation pushes interest rates higher, because bond buyers demand a higher return to compensate for the eroding value of money. So home and car buyers pay more. As usual, lower-income Americans get hit the hardest, with the higher cost of gas and household energy leaving less money for everything else.
Trump is obviously concerned. He wants to suspend the federal gasoline tax, which is 18.4 cents per gallon. But he probably can’t do that without Congressional legislation, and it might not pass. The gas tax funds the Highway Trust Fund, and some members of Congress will likely object to raiding a primary source of infrastructure funding. Congress did not suspend the gas tax in 2022, when prices peaked at $5 per gallon.
Iran, meanwhile, remains defiant. It seems to be weathering a US blockade of its ports and testing how much political pain it can inflict on an American president. Millions of consumers, unfortunately, are the conduit for that pain.
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