To make matters worse for Trump, consumers are anticipating that his economic strategies will exacerbate inflation rather than alleviate it. True to his word, Trump has placed tariffs on imported goods at the forefront of his economic agenda, with new customs duties already in place on certain imports and more expected to follow suit. Surveys unequivocally indicate that Americans foresee Trump’s tariffs leading to price hikes. According to the University of Michigan’s monthly survey, respondents predict a 4.3% inflation rate within a year, with this outlook deteriorating over the past few months.
Feel free to drop a message to Rick Newman, connect with him on Bluesky, or subscribe to his newsletter. It appears that a breaking point is on the horizon. If inflation becomes a concern six months down the line, few will attribute it to Biden’s actions. Trump will be compelled to either retract many of his tariff threats or inform voters that they must accept the increased prices.
Fortunately, Trump does possess viable exit strategies for most of his tariff warnings. Given that he can implement them unilaterally, he also has the power to repeal them unilaterally. Throughout his initial term, Trump asserted that tariffs were designed to reduce the U.S. trade deficit, which presented a formidable challenge for him to claim success, considering that these deficits didn’t diminish significantly.
This time around, Trump has established more flexible objectives for his trade disputes, such as seeking assistance from foreign nations in addressing illegal immigration or securing more favorable terms for U.S. exports. This shift enables Trump to announce triumph and assert that tariffs are no longer necessary.
The question remains: how long will Trump delay? The severity of inflation may play a pivotal role. Most economists do not anticipate a return to 9% inflation in the near future. It is plausible that inflation may persist slightly above normal at around 3%, or escalate to approximately 4% in a pessimistic scenario. It is uncertain whether unforeseen factors like egg prices or other isolated incidents will disproportionately impact consumer sentiment and fuel the belief that inflation is more severe than it actually is. Additionally, many Americans, fatigued by three years of atypical price surges, are particularly sensitive to any further increases.
Trump appears confident that he will not experience the same challenges with inflation as Biden did. Instead of combatting inflation, his initial actions are centered on deregulation, abolishing policies on cultural sensitivity, curbing illegal immigration, and even advocating for the resurgence of plastic straws. Perhaps Trump believes that voters will forever link Biden with inflation and view him as the solution.
However, it is worth noting that Biden will not be a candidate in the upcoming election. Rick Newman serves as a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman. For the latest political news related to business and monetary policies that will influence tomorrow’s stock market trends
