“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent on a seasonally adjusted basis in July, after rising 0.3 percent in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.7 percent before seasonal adjustment.” BLS.gov
The damage is already being done from Donald Trump’s tariffs that are for the most part illegal—higher inflation. And American consumers and businesses will soon realize what it does to their pocketbooks as they begin to pay for his big, beautiful tax cuts for the wealthiest.
Inflation has been rising since April when President Trump announced his trade war on the rest of the world. The core retail Consumer Price Index without gas and food prices that the Federal Reserve prefers increased to 3.1% annualized, way above the Fed’s target rate to keep inflation from getting out of control.
Though the CPI energy index decreased 1.6% for the 12 months ending July, the food index increased 2.9% over the last year, which worries consumers more. And food prices will continue to increase as Trump chases almost half of the agricultural workers from American fields they harvest in his roundup of undocumented immigrants.
We can learn from past episodes the effects of inflation when out of control, such as the 1970’s stagflation from the OPEC embargo induced oil shortages. The COVID-19 pandemic caused more recent product shortages and supply chains shutdowns as well that pushed CPI inflation to 9% in 2022 and was the Democrats undoing.
The COVID-induced inflation backed down to 3% in a year (June 2023), but voters believed Trump when he said he would bring down inflation on “Day 1”.
Trump’s trade wars are affecting economic growth, the other part of the stagflation equation, because exporters are disrupting supply chains in their attempts to avoid the higher tariffs. And because Trump has declared tariffs on everyone, it’s more difficult for exporters to find a work around.
We have barely begun to see the effect of the tariff hikes because Trump keeps postponing many of them, giving China another 90 days to come to terms, for instance, though China’s tariff rate is already 30 percent.
Slowing growth will begin to show up soon enough in his tariff scheme. Q2 GDP grew 3% after its negative -0.5% shrinkage in Q1 because imports dried up after April 2 when Trump announced his trade war.
But GDP growth will shrink again as importers begin to pay a higher tax when more tariff agreenebts kick in. There is one problem, however. Trump may have to refund the $130 billion his administration has already collected to those very same importers, if his appeal to the Foreign Trade Court is denied. And the appeals court may decide so, since he had declared the trade deficit a national emergency, which means the Trump administration must return those funds.
As Paul Krugman said recently on Lawrence O’Donnell’s MSNBC show, The Last Word, it will then be Trump’s problem to unscramble the accounting mess that it will cause in returning the money to those importers that were levied.
Americans will soon see the results in growth when their prices begin to rise in earnest. Trump is literally using the tariff taxes paid by American businesses and ultimately consumers in higher prices to pay for the tax cuts given to his wealthiest supporters, as I said. And that will begin to stall economic growth very soon as Americans have less to invest and spend.
It will be the price we must pay, unfortunately, until enough voters realize President Trump and his Republicans have foisted a giant Ponzi scheme on the American people.
Harlan Green © 2025
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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