Trump Is Caught in His Own Inflation Trap

With midterm elections looming and Americans furious about living costs, President Trump picked an odd moment to advertise inflation’s benefits. “Certain levels of inflation will also pay off that debt very rapidly. Very rapidly,” he told Time magazine. Elected on a promise to make life cheaper, he now explains how making Americans’ dollars worth less helps their fiscally incontinent government.

Trump’s credibility on living costs has suffered a slow puncture. He won power after President Biden presided over America’s highest peak inflation since 1981. Yet YouGov now puts Trump’s net approval for handling inflation at minus 39 points, below Biden’s worst of minus 35. It is one reason why prediction markets favor Democrats taking both houses of Congress next week.

Republicans’ troubles on living costs pre-date the Iran war. In February, a typical Ipsos poll already found 65 percent of Americans disapproving of Trump’s handling of inflation. Dissatisfaction had grown throughout last year, in fact, even as wages rose faster than prices.

The original sin was Trump’s 2024 election pledge: “We’re going to bring your prices down.” Voters heard a promise of deflation, not slower price rises. They remain shocked that consumer prices are 30 percent above pre-pandemic levels and see that as synonymous with a poor economy. Supermarket prices regularly top their concerns, despite rising just 1.8 percent over the past year. That is because every weekly shop reminds them how much purchasing power they have lost since 2020.

The president’s first mistake was thus overpromising. With monetary policy set by the Federal Reserve, inflation was never within his direct control. In any case, achieving deflation would have required a sudden, miraculous productivity boom, or a destructively tight monetary squeeze from the central bank. Not only did the administration advocate few policies toward either end, but most flagship measures made matters marginally worse.

First, there were self-inflicted supply shocks. Tariffs raised prices for imports, goods using foreign inputs and domestic substitutes, while deportations disrupted labor availability in agriculture and construction. Import taxes largely cause one-off price rises, rather than persistently higher inflation. But voters are clearly concerned about the overall price level right now.

On the demand side, a mammoth deficit of about 6 percent of GDP put upward pressure on Treasury yields and, in turn, mortgage and car loan costs. Trump’s constant demand for Jerome Powell, the former Fed chairman, to deliver cheaper money completed the incoherence.

The war in Iran then added a gasoline price shock to this credibility problem. September’s inflation rate hit 3.7 percent, far above the 2.9 percent Trump inherited. Over the past year, gasoline prices have jumped by more than a third, while average hourly pay, adjusted for inflation, has fallen 0.7 percent. What began as loose links between Trump’s agenda and higher prices has become a measurable squeeze on American’s living standards.

What’s baffling is how the president’s political instincts deserted him on this. He repeatedly recalls spotting gasoline at $1.85 a gallon in Iowa before deciding to attack Iran. When beef prices soared, he eased restrictions on Argentinian imports — a tacit admission that protectionism raises prices. It’s not that he wasn’t warned either. Larry Summers, the former Treasury secretary, said in 2024 that Trump’s tariffs and macroeconomic ideas alone risked fueling inflation.

As discontent spread, Trump first dismissed affordability concerns as a hoax. Then his administration scrambled for remedies, from targeted deregulation to curbs on institutional investors buying houses. Now he extols inflation’s usefulness in eroding debt. Voters are left wondering if he wants to fight inflation or exploit it.

Democrats hardly possess a credible affordability program of their own. Most proposals amount to damaging price controls, subsidies and regulations that shuffle costs rather than instilling macroeconomic discipline or liberating supply. But it was Trump who taught voters that high prices were a political failure. The issue may now cost his party Congress and defang his legislative agenda.