Meanwhile, Inflation Creeps Upward
Seeing the effects of Trumponomics.
So reports the NYT:
The White House opted to try to downplay the latest inflation gauge, which showed that prices overall rose 2.7 percent from a year ago, the swiftest pace since February.
One will grant that 2.7% is not a large number, but we are going in the wrong direction (especially if Trump wants interest rates lowered).
The tariffs are a major component of the story.
Prices rose noticeably on appliances, clothing and furniture, products that are all heavily exposed to the president’s taxes on imports from Canada, China and other major trading partners.
It is worth noting that while on the one hand, Trump has, in fact, chickened out on some of the initial tariffs that were issued, and he may yet TACO the August 1 deadline that he has set. On the other hand, even with some of the more dramatic numbers perhaps not being deployed, current tariff levels are higher than they have been in a very long time. So reports Yale’s The Budget Lab as of July 14, 2025:
Current Tariff Rate: Consumers face an overall average effective tariff rate of 20.6%, the highest since 1910. After consumption shifts, the average tariff rate will be 19.7%, the highest since 1933.
See, also, Krugman: Hawks, Doves and Lapdogs.
I, however, am a TACO skeptic. I think Trump really is a Tariff Man who will keep us at Smoot-Hawley-level tariffs indefinitely, and businesses will eventually realize that and raise prices accordingly.
And then what? Clearly, we shouldn’t expect Trump to admit that his tariffs are raising prices, or even to admit that prices are rising. What we can expect is that he will keep putting pressure on the Fed to cut interest rates. I don’t think he’ll manage to push Jerome Powell out before next May, but as I wrote last week, whoever he picks after that will do his bidding.
None of this is good, and the damage will be real if Trump gets what he wants.
Meanwhile, imagine if Joe Biden didn’t remember who he appointed to be Fed Chair?
If I am charitable, I can interpret Trump as referring only to the reappointment of Powell as Chair by Biden. But even that interpretation has Trump utterly ignoring that he was the one who appointed Powell in the first place.
I will hasten to add that if this were Biden in the clip saying the exact same thing, the media* would be merciless in their coverage.
*Appropriately edited as per Neil Hudelson’s comment below.
It would be used across all mainstream media to drive a week of Biden’s Cognitive Decline discussion.
@Neil Hudelson: That is a excellent edit.
Not to mention the contradictory aim of El Taco’s tariffs. It’s true they can raise revenue. It’s also true they can protect domestic industries from foreign competitors. But crucially they can’t do both at the same time.
To raise revenue, imports must be high. To protect industries, imports must be low. It should be obvious to anyone with three working neurons that imports can’t be high and low at the same time.
Another thing, with all the callbacks to McKinley*, financing the government with tariffs when there’s no income tax is one thing. trying to finance it with tariffs when there’s an income tax is very different.
Mix this with the above, and tariffs as revenue are, at best, a transitory means, too variable to be dependable.
BTW, El Taco did one of his patented TACO moves just yesterday. He veered into the FIRE POWELL lane in the morning, then claimed he has no intention to fire him after the S&P index fell.
*Sebastian Major at the Our Fake History podcast did a three-part ep on McKinley. two salient facts: 1) There’s an attempt by the right to rehabilitate McKinley’s reputation, including a very biased biography of him by one Karl Rove. 2) Teddy Roosevelt claimed his predecessor had the backbone of a chocolate eclair (not relevant, but hilarious).
The interesting thing about the felon’s pressure on the Fed to lower rates is that it won’t accomplish what he believes it will. The rates the Fed controls are short term to large banks, the longer term rates, car loans, mortgages, are set by the market. While it is true that the long term rates will rise or fall in accordance with what the Fed does, that’s not guaranteed. The Fed’s Dec/24 rate cut was followed by a, market driven, interest rate increase in 10 year treasury notes. The 10 year notes are what car loans and mortgage rates are pegged to.
The admin also seems to have adopted a half-assed version of Modern Monetary Theory, in the hope that Fed manipulating the money supply will reduce the interest cost of the federal debt. Of course devaluing the dollar will be wildly inflationary, but denial…
@Neil Hudelson: @Steven L. Taylor: What this country needs is a real left-wing press. MSNBC isn’t cutting it.
Actually, what this country needs is a real left wing. Mamdani is a tiny gleam of hope, but the supposedly liberal NYT has a vendetta against him and establishment Dems seem to be squirming.
@Sleeping Dog: “The 10 year notes are what car loans and mortgage rates are pegged to.”
The Fed seeks to influence interest rates, but as you say, it’s not guaranteed. Recent mortgage interest rates are a good example: The Fed implemented a series of three reductions in the Fed Rate from Sep to Dec 2024, for a total reduction of 1 percentage point. After those reductions, the average 30-year mortgage interest rate had increased about 0.5 percent.
Whatever the administration does, the financial markets will have their say.
@gVOR10:
I would argue that imitating Fox is a fools errand. What this country NEEDS is a 4th estate that takes this moment in time seriously and strives to find truth, the real goal of journalism, instead of just access to beltway society.
@Daryl: I agree, that an MSM that prioritized truth would be the best solution. But I happened to catch Atrios just after reading your comment.
The question is whether the unlikely development of a left-wing press or the unlikely development of an unbiased, truth seeking MSM is the more realistic goal. We still have a few cities with what was once common, an R newspaper and a D newspaper. Given that we once had it, I would see competing partisans as more attainable than a high minded objective press. NYT is about as close as we get to the latter, and while they have moments of glory, and even dared endorse Harris (unlike someone else) they also have, as Atrios points out, too many FTFNYT moments. They’re so establishment they’d even like Cuomo back.
@Eusebio:
The bond vigilantes, who’ve been pretty much invisible for years, do seem to be emerging into view again.
What people are not seeing and saying yet is that tariffs are like sales taxes. It effects lower income folks disproportionately. So we are seeing tax cuts for the wealthy along with more taxes on the less wealthy. A double hit.
And OBTW, Trump and Republicans are well on their way to adding $6T to the national debt by the end of Trump’s term. Add the $7.8T from his first term and you get $13.8T in debt directly responsible to the Republicans. That is about 32% of all debt. In just 8 years of economic mismanagement.
Not that the innumerate MAGA Trump supporter will care.
@gVOR10: @Daryl:
Actual left wing vs. left wing press is a bit of a chicken or egg conundrum, right?
That’s before any evaluation of whether the profit motive interviews with the mission of an outlet. Adding whatever analysis from exploring that question complicates the subject a lot.
I also feel compelled to point out that if one considers center-left to center-right as (classically) liberal, specifically wrt economics, then NYT would be considered liberal in that sense.
And yet another lens: if the press is tied specifically to parties, rather than broader political economy, then the system that ensures two-party dominance also effectively limits MSM to the same narrow field of competing philosophies.
Note what this says about the substitutability of imported goods — there isn’t any. Consumers cannot be pushed into buying American by tariffs, because either there is no American substitute to be had or the American version is still significantly more expensive even after applying a hefty tariff. Cars are not the norm; they are the weirdo outlier, thanks to an installed capital base that other industries don’t have and can’t build.
@DrDaveT:
That’s why a protective tariff* needs some kind of import substitution program involving, planning, investment, training labor, etc. And such things take from months to years. You can’t order a steel mill or a microchip factory from Amazon and have it delivered tomorrow.
And bananas can’t be grown in the US. Neither can coffee.
*It also needs specific targeted tariffs. Not across the board made up numbers. You might also need quotas for a while.
Always important to remember [and explain in every inflation-related article] that “inflation” isn’t the problem. The problem is the poors having too much money.
Any inflation article without a mention of Mark Blyth’s recent excellent book on inflation is also missing key context. [And you won’t do badly if you go read everything he’s ever written, he runs the political economics department at Brown.]
Relative to discussions of inflation…. The fun thing about history is that “conventional wisdom” may be inaccurate over time.
70’s was not a problem merely of inflation. It was a collection of supply shocks.. a legitimate example of the adage “independent events clustering non-randomly”. What this actually does mean is that volcker’s actions were simply punishing labor because oligarchs have a sad —- and thus “volcker is competent” is a myth that’s erroneous both given the data at the time and wildly ahistorical upon further review.
If we’re in a similar initial oligarch condition today, the drive to push out the current head of the Fed is for the same reasons — they think he’s not punishing the poors enough and using inflation as an excuse.