Are the tariffs making America great again? The answer to that lies somewhere between the distinct border of have and have nots rather than left or right ideologies. As Donald Trump’s tariff-induced inflation begins to affect the average American household, and reflects in almost every aisle of the supermarkets, it is the lower income groups that have been hit the hardest with rising prices.
In the beginning of September, McDonald’s CEO Chris Kempczinski warned of a ‘two tier economy’ as lower income groups began to spend less. The fast food giant recently expanded its value meal menu and the analysts have been quick to point out the growing trouble in the economy as the reason behind. The same was further confirmed by Kempczinski who said while upper-income households continued to spend in a similar manner, it is the rest who have been struggling. “Particularly, with middle and lower income consumers, they’re reeling under a lot of pressure right now,” he told reporters while stressing how business houses like McDonald's, which has significant middle and lower income consumers, needed to step in during the tough times. Data from the Labour Department says prices have ticked up for clothes, electronics, coffee, everything.
Also read: Trump announces 100 pc tariffs on China from Nov
The economic divide has always been distinct among classes but in times of inflation, it becomes more pronounced. The rising grocery and fuel bills make the lower income groups far more vulnerable. Mark Zandi, chief economist at Moody’s Analytics, has gone so far as to call it a “tale of two different households.”
Tax Foundation, a Washington-based think tank, tracking the economic impact of Trump’s trade war, had predicted in the past that Trump tariffs will likely affect nearly 75 per cent of US food imports. A recent research by Harvard University professor Alberto Cavallo indicates that prices on both imported and domestic goods have climbed modestly but steadily since March of this year, even if the hike is still small relative to the size of tariffs. Cavallo and his team of researchers have been tracking the price of commodities, from coffee to carpets to clothes at major online and offline retailers in the US.
Also read: Wall Street crashes after Trump threatens 100 pc tariffs on China
The economy at the end of the day is cyclical and its impact, a 360-degree ripple effect. According to Moody’s Analytics, by the beginning of this year, the richest 10 per cent of Americans accounted for nearly half of all consumer spending. This hasn’t been the only data painting a weak picture of consumer spending. In the absence of federal data during the current economic transition, several other data monitoring institutions have pointed towards a grim scenario. “State level data makes it clear why the US economy is on the edge of recession,” Zandi said in a post on X, adding, “Based on my assessment of various data, states making up nearly a third of US GDP are either in or at high risk of recession, another third are just holding steady and the remaining third are growing.” Quantitatively speaking, he fears the economies of more than 20 states are either in recession or on the brink of slipping into one.
The inflation has breached the Federal Reserve’s 2 per cent target this year and has intensified in recent months as tariffs start coming into play; making the policymakers at the Federal Reserve note concerns about inflation and cut interest rates in September, a first in 2025.
The inflation—slow and steady, not steep and sudden
Since months now, MAGA loyalists have dismissed or shrugged off reports of inflation accompanied by tariffs. It is not the accelerated, steep and sudden inflation that economists had been warning about. One of the reasons being that a lot of tariffs that Trump had threatened, he hasn’t levied yet; for one reason or the other. The most notable one being the threatened 25 per cent tariffs on Mexico, which was quickly exempted. Anything that qualified for entry under the USMCA free trade agreement has been spared, perhaps after realising the immediate havoc it would create if the tariffs were levied. Mexico is the top source of US imports and a tariff of 25 per cent would have meant immediate, instant and crippling blow to the US consumers.
Also read: India-Pak truce secured by 'threatened 200pc tariffs': Trump
In the meanwhile, Trump stays inflexible and non-conceding, likening his stance on tariffs as a master move and even means to global peace. As for inflation, he told the United Nations General Assembly late last month, “Grocery prices are down, mortgage rates are down, and inflation has been defeated.”
Last week, while talking to reporters at the White House, Trump credited tariffs for preventing several wars. “If I didn’t have the power of tariffs, you would have at least four of the seven wars raging. If you look at India and Pakistan, they were ready to go at it. Seven planes were shot down. I don’t want to say exactly what I said, but what I said was very effective. Not only did we make hundreds of billions of dollars, but we’re a peacekeeper because of tariffs.”
How much an average American ends up paying for that peace will become even clearer in the months to come.
Follow us
