Here’s Donald Trump as president in 2025: “I couldn’t care less if [automakers] raise prices. “I couldn’t care less. I hope they raise their prices.”
Trump’s pledge to battle inflation during the 2024 presidential campaign helped get him elected. Voters clearly felt stung by the elevated prices of the Biden years and thought Trump would bring relief.
Trump’s inflation rhetoric from 2024 now looks like one of the most rapidly abandoned campaign promises in political history. Trump has imposed massive import tariffs that are overtly inflationary and make thousands of everyday products more expensive. On top of that, Trump is now trying to pressure the Federal Reserve into adopting a monetary policy that would make inflation even worse.
Read more: $6 eggs and other inflation pain points: Here’s where prices are rising
Trump isn’t just tolerating inflation, as a listless Joe Biden seemed to do from 2022 to 2024 while his approval rating tumbled. Trump is actively courting inflation, defying economists forecasting renewed price hikes and the message from voters who last year punished the incumbent party they associated with wrecking their purchasing power.
When Trump won the election last November, inflation had fallen from a peak of 9% in 2022 to 2.7%, and it looked like the Federal Reserve’s monetary tightening from 2022 to 2024 had worked. The National Association of Business Economists expected inflation of just 2.3% by the end of 2025, close to the Fed’s 2% target. Investors thought the Fed would be cutting rates throughout 2025, with an 85% chance of at least one rate cut by early May, according to the CME Group’s FedWatch tool.
Nearly six months later, Trump’s tariffs have completely changed the outlook for inflation and interest rates. The NABE inflation forecast has now risen to 3.4% by the end of the year. The Fed hasn’t cut rates at all since last December, mainly because it’s worried that Trump’s tariffs will cause reflation. The odds of a Fed rate cut by early May have dropped from 85% to 9%.
Reflation hasn’t happened yet.
The inflation rate in March was a tame 2.4%. But that measures the pre-tariff economy, and there’s no way around the fact that Trump’s tariffs will push inflation higher in the coming months, with eye-popping price hikes for some items. Trump so far has raised the effective tariff rate on about $3 trillion worth of imports from 2.5% at the start of the year to around 27%. Those tax hikes are just now going into effect. American importers pay the tax, passing the added cost on to US businesses and consumers. Shoppers will start to see the Trump price hikes once retailers sell out of pre-tariff inventory.
Trump’s 25% tariff on imported cars and car parts could raise the cost of a new vehicle by $5,000 to $10,000. While the tariff only applies to imports, many domestically assembled vehicles include imported parts that will become more expensive. And the higher cost of imported vehicles will raise the cost of domestics as well, since the higher cost of one product gives pricing power to those who make competing goods.
Read more: The latest news and updates on Trump’s tariffs
The Yale Budget Lab estimates that Trump’s tariffs will cause double-digit price hikes in a dozen or so broad categories of goods, including clothing, appliances, toys, and pharmaceuticals. The biggest culprit will be Trump’s 145% tax on Chinese products, which will hit products largely sourced in China. Leather goods such as belts and shoes will become 86% more expensive, the group estimates. Clothing prices will rise by 64%.
On his way out? Chair of the Board of Governors of the Federal Reserve System Jerome Powell speaks during an event hosted by the Economic Club of Chicago on April 16, 2025. (AP Photo/Erin Hooley) ·ASSOCIATED PRESS
Trump is now pressuring the Fed to lower short-term interest rates, which could make Trumpflation worse. The Fed normally lowers rates when the economy is weak and needs a boost. By making money cheaper, lower rates juice lending and spending, stimulating growth. Inflation isn’t usually a problem in that scenario because spending — demand — is weak to start with.
But lowering rates in an inflationary environment strengthens demand when it’s already strong, worsening inflation. That’s why the Fed is on hold and investors no longer expect the Fed to cut anytime soon.
Trump has openly mused about firing Powell, presumably replacing him with a chair who is more willing to cut rates at the wrong time. Trump is blatantly ignoring the lesson of Richard Nixon’s interference with the Fed in the early 1970s, when Nixon pushed Fed Chair Arthur Burns to lower rates to boost the economy and aid Nixon’s 1972 reelection bid. That contributed to inflation that peaked above 12% in 1974 and correlated with a recession.
Trump’s view of inflation now seems to be that tariffs and protectionism are more important than lowering prices. He wants to reinvigorate US manufacturing and now says the “medicine” is worth it. Most economists say it is not. The economy may have needed targeted fixing when Trump took over in January, but it didn’t need the shock treatment Trump is administering.
An obvious question for Trump is whether he’s willing to bear the political cost of higher inflation, as Biden did when his approval rating sank and never recovered.
Trump’s marks for handling the economy are already falling, hitting 43% in a recent CNBC poll, the lowest mark ever for Trump. His disapproval rating on the economy is 55%, the highest ever. Forty-nine percent of respondents think the economy will get worse, the highest in the CNBC poll series in two years. That’s Biden territory. Consumer confidence surveys, meanwhile, show that Americans broadly expect substantial inflation in the coming months and are as gloomy as ever.
Trump’s overall approval rating has dropped from 52% in January to 46% today. That’s not a huge drop, but again, most of Trump’s tariff consequences haven’t arrived yet. As prices go higher, Trump’s ratings will go lower.
We saw this show during the Biden administration, and the rerun isn’t going to play any better.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman.
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