MW Consumers elected Trump to fix prices - his policies could do the opposite

By Venessa Wong

Trump supporters named inflation as their top concern during the election. His aggressive actions on tariffs and immigration stand to make prices higher.

For supporters of President Donald Trump, the economy was the top concern ahead of the election, specifically inflation. Yet six weeks into his term, the president's agenda - laid out in his address to Congress on Tuesday night - has not yet focused directly on taming consumer prices. Instead, Trump has swiftly enacted tariff and immigration policies that stand to further increase the financial pressure that is weighing down so many low- and middle-income consumers.

Economists told MarketWatch that Trump's actions in his first weeks in office could worsen American consumers' financial well-being. "What he has announced and has enacted is both negative for growth and boosts inflation. So it has a stagflationary impetus to it," Nationwide Chief Economist Kathy Bostjancic told MarketWatch.

While inflation was a centerpiece of Trump's campaign, so far "We're not seeing anything that is credibly going to address the high prices of food, housing and health care that he pledged to do something about," Adam Hersh, senior economist at the Economic Policy Institute, a left-leaning think tank, told MarketWatch. "What he talked about doing is almost certain to cause prices to go up."

In Trump's address to Congress, he said his administration is "working hard" to bring down high egg prices, which he said were a result of former President Joe Biden's policies. To that end, Trump's agriculture secretary has pledged up to $1 billion for biosecurity measures, financial relief for farmers and vaccine research for bird flu.

Trump said Tuesday he would "defeat inflation" by cutting energy costs, in part by tapping into the domestic energy supply - a strategy he mentioned frequently on the campaign trail.

Trump also restated a debunked DOGE claim that tens of millions of dead people are receiving Social Security payments, and said that by slashing "all of the [Social Security] fraud, waste and theft we can find, we will defeat inflation, bring down mortgage rates, lower car payments and grocery prices, protect our seniors and put more money in the pockets of American families."

Still, the president said little else about his plans to bring down prices, focusing instead on his administration's aggressive actions to reduce government spending through the so-called Department of Government Efficiency, an initiative led by Elon Musk, and to improve safety by closing the border and deporting immigrants.

Read more: Americans are racing to prep for tariffs, but many aren't ready - especially this group

A White House official told MarketWatch that Trump's speech did address inflation. They said that the president's remarks about DOGE explained how his administration is cleaning up the excessive spending under Democratic leadership that ratcheted up inflation. Trump's comments in the speech about supply-side reforms and deregulation show how he plans to deliver price relief, the official said.

In the Democratic response to Trump's speech, Michigan Sen. Elissa Slotkin said, "Grocery and home prices are going up, not down, and he hasn't laid out a credible plan to deal with either of those. His tariffs on allies like Canada will raise prices on energy, lumber and cars and start a trade war that will hurt manufacturing and farmers."

Vermont Sen. Bernie Sanders noted in his comments that 60% of Americans live paycheck to paycheck, and "I did not hear one word from Trump tonight about the economic reality facing 60% of our people, or the enormous stress that they are living under."

Viewers, however, seemed to like Trump's message. In a CBS News survey, 68% of viewers of Trump's speech on Tuesday said he had a clear plan for inflation, 77% said they like his plans to reduce government spending and immigration, and 66% said they liked his plan for tariffs.

Trump said earlier this year that while voters named inflation as their top issue, he believes their top concern was actually immigration.

Cutting government spending won't quickly solve high prices

Recent DOGE cuts to the federal workforce and contracts, while dramatic, face legal challenges and would likely have a minimal impact on inflation for people who need relief from high prices now, Hersh said.

"Balancing the budget, in theory, over the long term will withdraw some aggregate demands, and so that eases inflationary pressures," Hersh said. If they actually achieve that in a budget, price relief would follow "in the distant years, not not this year or next year."

Related: Is the White House trying to engineer a recession? This Wall Street pro explains the vision.

The complication, said Nationwide's Bostjancic, is "in the near term, when you reduce spending for the government that directly is a drag on growth," explaining that government spending is counted when measuring GDP growth and helps to stimulate economic activity and the private sector.

The Atlanta Fed's latest estimate for GDP growth, based on available economic data, is that the economy will shrink by 2.8% in the first quarter.

Hersh added that "all the uncertainty and chaos" that DOGE and Trump's tariff policies set off have made the business climate very unclear. Economists are now concerned this could lead to a recession.

So far, it seems "The main channel through which [Trump's policies] will affect prices is not through the budget balance, but through recessionary effects," Hersh said.

Tariffs and immigration policies could have an inflationary effect

Trump's 25% tariffs on goods from Mexico and Canada, as well as an additional 10% tariff on goods from China, went into effect this week. China and Canada announced retaliatory tariffs in response. The administration's tariff plan remains in a state of flux, with Trump delaying auto tariffs on Mexico and Canada by one month on Wednesday.

Financial markets fell on concerns that the trade war could drag the U.S. into a recession. Retailers such as Best Buy $(BBY)$ and Target $(TGT)$ have warned consumers to expect higher prices as companies pass on tariff costs to shoppers.

The Peterson Institute for International Economics estimates that Trump's tariffs could amount to more than $1,200 in additional yearly costs for the median U.S. household. Those hoping to find cheaper options by buying American - as the president has suggested - will be disappointed, as "domestic producers that compete with the newly tariffed imports will increase their prices in line with import price increases. This will add insult to injury for U.S. consumers, raising their costs," according to the Peterson Institute report.

Energy prices have been one of Trump's main talking points on inflation, with promises to boost domestic gas and oil production to decrease prices, which he said will benefit all corners of the economy.

Yet shifting to domestic production is not straightforward, and the 10% tariff on Canadian energy could increase gas prices by 10 to 25 cents a gallon within days or weeks in regions such as the Great Lakes, upper Midwest and Rockies, as MarketWatch previously reported.

Meanwhile, as Trump proposes opening U.S. doors to the global rich through a $5 million "gold card" visa - which could worsen housing affordability - he has also begun the deportation of millions of undocumented immigrants, which could cause labor shortages that increase prices for housing, groceries and day care.

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-Venessa Wong

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March 05, 2025 18:10 ET (23:10 GMT)

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