A day late and a dollar short, Americans are realizing that President-elect Donald Trump plans to short them a few dollars. That’s right: Since the election, U.S. consumers have become more likely to say they expect prices to rise next year.
Make sense of the latest news and debates with our daily newsletter
Trump based his 2024 campaign on an seductive promise: He’ll bring prices down. Alas, it is virtually impossible to reduce prices; the overall level of prices almost never falls unless an economy is really sick (as it was during the Great Depression, the last time we saw widespread deflation). The best that economists generally hope for is for growth in prices to slow and for prices themselves to more or less plateau. This is already happening for some consumer products, such as groceries.
However, none of this is intuitive to non-economists. And Trump has taken advantage.
Only after winning last month did Trump fess up, belatedly acknowledging he can’t bring prices down. “I’d like to bring them down,” he told Time magazine. “It’s hard to bring things down once they’re up. You know, it’s very hard.”
Follow Catherine Rampell
Got that? There was no plan, there is no plan, and there was never going to be any plan to reduce prices. The only thing surprising about this admission is that he said it out loud.
One thing Trump didn’t acknowledge, however, is how his economic agenda — tariffs, deportations, tax cuts and kneecapping the Federal Reserve — could worsen the problem that voters hired him to solve.
But Americans seem to be catching on anyway. Every month for decades, the University of Michigan has surveyed consumers nationwide about their views on the economy. Since the election, there has been a surge in respondents saying that now is a good time to purchase big-ticket items, because prices will probably rise. Respondents became more likely to anticipate price increases for major household purchases (furniture, appliances, etc.) as well as for vehicles.
Consumers’ expectations for inflation overall (not just for major purchases) have also gotten a bit worse since the election. On average, consumers expect that prices a year from now will be 2.8 percent higher (up from 2.6 percent in November). It’s a small increase, but it also happens to be the first month-over-month increase in inflation expectations since May.
We don’t know for sure what’s driving these shifts in consumer views. Most likely, Americans are absorbing news coverage of Trump’s proposed tariffs and their potential to raise prices on food, cars, apparel, appliances and other common household purchases. Researchers at the Peterson Institute for International Economics estimate that 10 percent global tariffs and 60 percent tariffs on Chinese goods could cost a typical American family about $1,700 a year.
Threats of mass deportations and reduced legal immigration for seasonal agricultural workers have also led to more news stories about how U.S. farms could be left shorthanded, driving up fruit, vegetable and dairy prices. And though I don’t really expect American voters to be paying a ton of attention (yet) to Trump’s threats to Fed independence, that should also be a five-alarm fire for anyone who cares about inflation.
Meanwhile, some U.S. companies are already pulling forward purchases and stockpiling imported goods. This precaution is not only to front-run possible tariffs, but also to avoid other geopolitical and supply-chain threats. Iran-backed Houthi attacks against merchant vessels in the Red Sea have forced U.S.-bound ships to reroute around southern Africa. Meanwhile, potential strikes at U.S. ports across the East and Gulf Coasts could begin as soon as mid-January. The possible strikes are nudging companies to bring over imported goods early, or to consider costly alternative shipping routes.
These factors are already driving up shipping prices, and forcing U.S. companies to absorb the costs of purchasing and warehousing inventory they’re not yet sure they’ll need. Some of those costs will likely get passed along to consumers.
Trump could easily make all of these problems worse.
https://www.washingtonpost.com/opin...itid=mc_magnet-opbizecon_inline_collection_19
For some reason, he’s threatening to take over the Panama Canal, a crucial transit point for U.S. goods. This month, he supported U.S. dockworkers’ demands for ports to abandon planned investments in automation. To be clear, U.S. ports are among the least efficient in the world, precisely because they have put off basic technological improvements. Delaying automation further will lead to higher consumer prices in the long run, while protracted labor strikes against this measure could drive up import costs in the near term.
Consumers might not be totally aware of all these risks. But they seem to have a growing sense — “vibes,” if you will — that a second Trump term could bring more uncertainty to the U.S. economy. And that sense of unease in and of itself can lead to bad economic outcomes.
“If sufficient numbers of consumers follow through with preemptive purchasing to avoid future price escalations,” explains Joanne W. Hsu, the director of the University of Michigan’s Surveys of Consumers, “such a burst of spending could in itself exert upward pressure on inflation and could potentially contribute to a self-fulfilling prophecy.”
Sigh. If only voters had realized all this before Nov. 5.
Make sense of the latest news and debates with our daily newsletter
Trump based his 2024 campaign on an seductive promise: He’ll bring prices down. Alas, it is virtually impossible to reduce prices; the overall level of prices almost never falls unless an economy is really sick (as it was during the Great Depression, the last time we saw widespread deflation). The best that economists generally hope for is for growth in prices to slow and for prices themselves to more or less plateau. This is already happening for some consumer products, such as groceries.
However, none of this is intuitive to non-economists. And Trump has taken advantage.
Only after winning last month did Trump fess up, belatedly acknowledging he can’t bring prices down. “I’d like to bring them down,” he told Time magazine. “It’s hard to bring things down once they’re up. You know, it’s very hard.”
Follow Catherine Rampell
Got that? There was no plan, there is no plan, and there was never going to be any plan to reduce prices. The only thing surprising about this admission is that he said it out loud.
One thing Trump didn’t acknowledge, however, is how his economic agenda — tariffs, deportations, tax cuts and kneecapping the Federal Reserve — could worsen the problem that voters hired him to solve.
But Americans seem to be catching on anyway. Every month for decades, the University of Michigan has surveyed consumers nationwide about their views on the economy. Since the election, there has been a surge in respondents saying that now is a good time to purchase big-ticket items, because prices will probably rise. Respondents became more likely to anticipate price increases for major household purchases (furniture, appliances, etc.) as well as for vehicles.
Consumers’ expectations for inflation overall (not just for major purchases) have also gotten a bit worse since the election. On average, consumers expect that prices a year from now will be 2.8 percent higher (up from 2.6 percent in November). It’s a small increase, but it also happens to be the first month-over-month increase in inflation expectations since May.
We don’t know for sure what’s driving these shifts in consumer views. Most likely, Americans are absorbing news coverage of Trump’s proposed tariffs and their potential to raise prices on food, cars, apparel, appliances and other common household purchases. Researchers at the Peterson Institute for International Economics estimate that 10 percent global tariffs and 60 percent tariffs on Chinese goods could cost a typical American family about $1,700 a year.
Threats of mass deportations and reduced legal immigration for seasonal agricultural workers have also led to more news stories about how U.S. farms could be left shorthanded, driving up fruit, vegetable and dairy prices. And though I don’t really expect American voters to be paying a ton of attention (yet) to Trump’s threats to Fed independence, that should also be a five-alarm fire for anyone who cares about inflation.
Meanwhile, some U.S. companies are already pulling forward purchases and stockpiling imported goods. This precaution is not only to front-run possible tariffs, but also to avoid other geopolitical and supply-chain threats. Iran-backed Houthi attacks against merchant vessels in the Red Sea have forced U.S.-bound ships to reroute around southern Africa. Meanwhile, potential strikes at U.S. ports across the East and Gulf Coasts could begin as soon as mid-January. The possible strikes are nudging companies to bring over imported goods early, or to consider costly alternative shipping routes.
These factors are already driving up shipping prices, and forcing U.S. companies to absorb the costs of purchasing and warehousing inventory they’re not yet sure they’ll need. Some of those costs will likely get passed along to consumers.
Trump could easily make all of these problems worse.
https://www.washingtonpost.com/opin...itid=mc_magnet-opbizecon_inline_collection_19
For some reason, he’s threatening to take over the Panama Canal, a crucial transit point for U.S. goods. This month, he supported U.S. dockworkers’ demands for ports to abandon planned investments in automation. To be clear, U.S. ports are among the least efficient in the world, precisely because they have put off basic technological improvements. Delaying automation further will lead to higher consumer prices in the long run, while protracted labor strikes against this measure could drive up import costs in the near term.
Consumers might not be totally aware of all these risks. But they seem to have a growing sense — “vibes,” if you will — that a second Trump term could bring more uncertainty to the U.S. economy. And that sense of unease in and of itself can lead to bad economic outcomes.
“If sufficient numbers of consumers follow through with preemptive purchasing to avoid future price escalations,” explains Joanne W. Hsu, the director of the University of Michigan’s Surveys of Consumers, “such a burst of spending could in itself exert upward pressure on inflation and could potentially contribute to a self-fulfilling prophecy.”
Sigh. If only voters had realized all this before Nov. 5.
