Back during the last presidential campaign, Donald Trump made political hay with the notion that higher than normal inflation was all down to the Democrats’ fiscal spending programmes. Never mind that prices went up for myriad reasons — like post-Covid pent-up demand, supply chain disruptions, the war in Ukraine and possibly even corporate concentration — Trump won the election in part because he was able to convince enough Americans that inflation was Joe Biden’s fault.
Now, a more expensive shoe is on the other foot. The US president claims inflation is going down, but it is in fact higher than it was when he was elected. Hawks are once again ascendant at the Federal Reserve, warning that a rate cut in December is unlikely.
Meanwhile, even as Trump walks back some levies on grocery items like beef and coffee, double-digit tariffs are probably the new normal (history teaches it takes years to bring them down once raised). And many secular and cyclical trends beyond tariffs suggest a more inflationary environment.