In recent years, Social Security benefits for millions of Americans have been impacted by various economic factors, including the tariffs imposed by President Donald Trump. These tariffs, which included a 10% global tariff and additional reciprocal tariffs from other nations, have had a significant effect on inflation levels.
This rising inflation, as reported by Newsweek, could lead to higher cost-of-living adjustments (COLA) for Social Security beneficiaries beginning in 2026. However, while COLA increases may appear to offer some relief, the reality is more complex, as the overall impact of inflation may offset these adjustments. This article examines how tariffs influence COLA and what it means for seniors.
The Impact of Trump’s Tariffs on Inflation
In 2018, President Trump imposed a 10% global tariff on a range of imported goods. In addition, many countries responded with their own reciprocal tariffs, further contributing to price hikes across the board. According to experts, these tariffs have caused a roughly 2.3% increase in prices in the short term. While this might seem like an increase in wages, it actually pushes prices up, affecting seniors on fixed incomes.
Inflation, exacerbated by these tariffs, directly influences the COLA that seniors receive. The formula for determining COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which looks at inflation from July through September of the prior year. If inflation rises during this period, the COLA will increase.
While this mechanism is designed to ensure Social Security benefits keep pace with inflation, it often fails to reflect the real-time impact of price increases.
Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek:
The ‘Trump bump’ is the cruelest kind of ‘raise.’ Tariffs are pushing prices up roughly 2.3 percent in the short run, which inflates the COLA seniors get. So yes, checks go up a bit more than they would have. But here’s what the headlines miss: the same inflation driving that bump is eating the buying power before the check even clears.
Will the COLA Increase Be Enough for Social Security Beneficiaries?
As inflation continues to rise, the COLA for Social Security benefits is expected to increase by 2.7% to 2.9% for 2026, according to Kevin Thompson, CEO of 9i Capital Group. However, this increase does not necessarily mean that seniors will feel a real benefit. With the rising cost of essential goods and services, many seniors find that the increase in their Social Security benefits is offset by higher costs elsewhere, such as rising healthcare premiums.
Ryan explains that while the COLA formula is designed to adjust for inflation, it is inherently backward-looking. This means that seniors spend months paying elevated prices due to tariffs, only to receive a retroactive adjustment in October that may only cover 70-80% of what they have already lost in purchasing power.
Seniors spend January through September paying elevated prices on imports, then get a retroactive adjustment in October that might cover 70-80 percent of what they’ve already lost – said Ryan.
Moreover, Thompson warns that the rising costs driven by inflation are putting additional stress on the Social Security Trust Fund. As more money flows out of the system to cover the increased benefits, the sustainability of the fund could be in jeopardy, especially as healthcare costs continue to rise at a rate far above inflation.
The Bigger Picture: Tariffs, Inflation, and Medicare Costs
Despite a COLA increase that might seem substantial, it’s unlikely to be enough to offset the rising costs seniors face, particularly those related to Medicare premiums. For many seniors, this means that the higher Social Security benefits won’t provide relief from the increasingly expensive healthcare system. Thompson highlights this concern:
Inflation still remains an issue for not only Social Security beneficiaries but also the Federal Reserve’s mandate. This also may put more stress on the Social Security trust fund as more money comes out of the system.
Alex Beene, a financial literacy expert, adds that the COLA increase is merely
keeping up with inflation – He explains
that the ‘bump’ isn’t a real raise but rather an adjustment designed to make up for the higher prices seniors are already paying.
While beneficiaries are getting more in their checks, that extra amount is meant to offset the increase in prices across the board. In other words, it’s not so much a raise as simply keeping up with inflation.
This means that even if seniors see an increase in their Social Security benefits, it may not be enough to improve their quality of life. Ryan goes on to say,
So that ‘bump’ shrinks before it reaches most retirees’ bank accounts. You’re basically watching your left pocket give money to your right pocket while inflation picks both.
