Inflation is proving to be a persistent obstacle for President Donald Trump, despite his campaign promises to reduce it swiftly. The latest consumer price index (CPI) report shows inflation rising to 3%, driven by strong consumer demand and higher energy costs. This challenges Trump’s assertions that his return to the White House would lower prices through increased oil production and economic policy shifts.
At the same time, Trump’s calls for interest rate cuts contrast with the Federal Reserve’s stance on keeping rates steady to control inflation. Meanwhile, new tariffs on imports, including those from China, Canada, and Mexico, may further fuel inflationary pressures. As the economy remains strong, with steady job growth and rising wages, concerns grow about whether inflation can be contained without triggering economic downturns.
Inflation rises despite Trump’s economic pledges
The consumer price index has increased in the three months following the November 2024 election, signaling continued inflationary pressure. According to the University of Michigan’s consumer sentiment survey, inflation expectations for the year have risen to 4.3%, compared to 3.3% the previous month. This rise is partly attributed to concerns over new tariffs introduced by the administration.
Higher prices for gasoline, consumer goods, and auto parts indicate that inflationary trends remain entrenched, despite Trump’s claims that his policies would quickly curb price growth. Federal Reserve Chairman Jerome Powell reaffirmed the central bank’s commitment to keeping inflation at 2%, stating that the Fed would adjust interest rates accordingly.
Meanwhile, the bond market has reacted to inflation concerns. The yield on the 10-year Treasury note rose to 4.62%, a sign that investors expect prolonged inflationary pressures. According to economist Joseph Brusuelas of RSM, “Disinflation may be dead, and we may be looking at a higher rate of inflation than we observed for the 20 years prior to the pandemic.”
Tariffs and spending cuts spark debate on economic policy
Trump’s economic strategy includes a mix of tariff increases and potential spending cuts to address inflation. The administration has imposed 10% tariffs on Chinese imports, while removing exemptions on previous steel and aluminum tariffs. There is also speculation about increased tariffs on Canada and Mexico, further fueling concerns about price stability.
In addition to tariffs, billionaire Elon Musk, who heads the newly created Department of Government Efficiency, has proposed a $1 trillion federal spending cut to reduce inflation. Musk argues that reducing government borrowing would lower interest rates, thereby easing financial burdens on American households.
However, according to Michael Linden of the Washington Center for Equitable Growth, such drastic cuts could lead to a severe recession, given that they would reduce federal spending by 4% of GDP in a single year.
