Donald Trump and maga Republicans do nothing to push back on the inflationary impact of illegal Trump tariffs

Donald Trump insists he will never repeat Herbert Hoover's economic mistakes. 

In fact, Donald Trump repeatedly stated that he does not want to be remembered like Herbert Hoover, the president who took office right before the Great Depression. He has expressed this sentiment on several occasions, including a July 2026 CNBC interview where he emphasized, "I always said I don't want to be a president with a depression on his resume. I don't want to be Herbert Hoover". In fact, Donald Trump emphasized this again when he explained why he signed the surrender document called a Memorandum of Understanding (MOU), for the purpose of engaging with Iran about opening the Strait of Hormuz. Iranians closed this free and open avenue of commerce when Donald Trump launched the illegal war against Iran.  Although Donald Trump said the reason for his illegal war was to prevent Iran from creating a nuclear bomb, the Memorandum of Understanding signed at the French Palace of Versailles, was agreed to because Trump wanted to open the Strait of Hormuz, and had nothing to do with preventing Iran's nuclear capabilities. Keeping the Strait closed, when it had been opened before February 28, 2026, was the only reason why Donald Trump surrendered.  He did not want to be responsible for a world wide Great Depression caused by his illegal war.

 

Is Trump unaware that he has already repeated one of President Hoover's mistakes❓ tariffs. Hoover signed the Smoot-Hawley tariffs. Trump initiated and continues to expand a similar program of tariffs. Is Trump unaware that he has already repeated one of those mistakes: tariffs❗ Echo opinion letter published in the Milwaukee Journal-Sentinel and in Yahoo.com

Herbert Hoover signed the Smoot-Hawley tariffs. Trump initiated and continues to expand a similar program of tariffs.

Trump's tariffs have contributed to inflation and increased everybody's cost of living. 

Were it not for that inflation, the Federal Reserve policy would likely favor lowering interest rates, which would lower the cost of living and promote economic expansion.

From Jim Rosenbaum, Whitefish Bay, in Wisconsin

Donald Trump owns rising inflation because his tariffs fuel spikes in costs while eggs prices are higher than ever

Inflation is heating up again, putting pressure on Trump to cool it on tariffs:  An echo essay published in The Conversation by Jason Reed, Associate Professor of Finance at Notre Dame University.

Inflation figures released on Feb. 12, 2025, will come as a disappointment to Americans who hoped Donald Trump would be true to his word on bringing down prices “on Day One.” It will also put pressure on the new administration to be wary of policies that may heat up inflation – and that includes tariffs.

The consumer price index, which measures the change in prices paid by consumers for a representative basket of goods and services, rose unexpectedly from December to January by 0.5%. It means consumers are paying around 3% more on item prices than they were a year ago.

Economists had been expecting the pace of inflation to slow in January.

The news isn’t good for anyone concerned. It means inflation remains above the Federal Reserve’s long-run target of 2% – making it harder for the central bank to cut rates at its next meeting on March 19. At its last meeting, the rate-setting Federal Open Market Committee kept its benchmark federal funds rate unchanged at a range of 4.25-4.50%.

Following the release of the latest inflation data, markets have a stronger conviction that the Fed will again hold rates steady when it meets in March.

It also means more pain for consumers. Higher interest rates set by the Fed play a large role in determining rates for mortgages, credit cards and auto loans. 

If January’s rate of inflation were to continue throughout 2025, consumers would see a painful 6.2% annualized inflation rate.

And although it would be churlish to link the latest jump in inflation to an administration just weeks old, it does put into focus the current slate of Trump economic policies. 

Economists have long warned that imposing tariffs on imports and cutting taxes does little to curb inflation – rather, they may contribute to faster price increases.

Already, China has been hit by a 10% tariff on all products. Trump has also proposed a 25% tariff on all steel and aluminum imports, and he mulled imposing new tariffs on Canada and Mexico – two of the United States’ largest trading partners.

I believe that if these wide-ranging tariffs come into effect, the Federal Reserve will have no choice but to keep rates elevated for the remainder of 2025.

Revving up for higher car costs:  One of the largest drivers of inflation in January was rent increases, which accounted for nearly 30% of all items increase. Rents jumped 4.6% from a year earlier.

If Trump’s tariffs on Canadian imports, like lumber, take effect, Americans can expect continued price increases in the homebuilding sector. Supply and demand imbalances remain a key driver for higher prices, so fewer houses being built due to higher materials cost will likely lead to higher rents.

Consumers saw better news on new vehicle prices, which remained flat over the month and showed slight declines from a year ago.

This is even as demand for new cars increased 2.5% over 2024. In January 2025, the number of new vehicles sold topped the same month a year earlier for the fifth month in a row.

But, as with homebuilding, any tariffs on the import of car parts or materials will impact the auto industry. Carmakers may have breathed an immediate breath of relief when Trump delayed new tariffs on Canada and Mexico. But if deals aren’t reached by the March 1 deadline, industry analysts expect immediate impacts on top sellers.

And any higher cost of new cars will have a knock-on effect on used cars, which saw prices jump 2.2% in January – it’s largest increase since May 2023.

Increased prices are no yoke! (groan):  Of course, not all inflationary pressures are in the purview of government.

The transportation sector, which includes insurance and parking fees, increased by 8% over the year. Insurance prices soared almost 12%, on the back of last year’s 20.6% increase in prices, while parking fees increased by almost 5% as a result of more expensive repairs and more dangerous driving behaviors.

Meanwhile, with bird flu continuing to spread, egg prices rose a shocking 15.2% in January, and are 53% more expensive than at this time last year. (Killing millions of chickens just to create enough wings for Super Bowl weekend also contributes to the egg shortage.)

All in all, voters who cited inflation as the main reason they were backing Trump may be feeling a little uneasy – the administration is only a few weeks old, but for one reason or other, Americans are experiencing ever higher prices with little relief in sight.

Interest rates respond to Trump tax cuts ~ Middle Class Alert!

Middle Class will be negatively impacted!

The Federal Reserve raised interest rates again! It’s said that President Trump isn’t all that happy about it. 

Well, that’s what an independent central bank does for you — it removes monetary policy from politics. There is a certain amusement here, though, which is that the Fed has raised rates not to annoy Trump, but because of Trump.

We have two sets of tools by which we can direct the economy in general, two types of macroeconomic policy. There is fiscal policy, which is taxes and spending, the balance between them. There's also monetary policy, interest rates and a number of more minor associated matters. Either or both can be used to direct that economy as whole. No, this isn’t the start to a beginner’s economics textbook, just take that as being true. It’s the basic outline of absolutely every model that any government, central bank or part of academia uses. It is true in this world even if it’s not in theory.

The thing is though, according to a theory currently best associated with the economist Scott Sumner, in a world with an independent central bank, we don’t actually have that fiscal policy that we can use. For the bank, as the Fed has done here, will simply alter monetary policy in order to take account of whatever is being done with fiscal policy. We might, for example, say we’re in a recession and slash taxes, or increase spending — those Keynesian sorts of things recommended back in the Great Recession — and this will boost the economy. 

But whatever interest rates would have been in the absence of that policy, or possibly the amount of QE and those associated minor matters, will be changed in order to reflect that new fiscal policy. Or maybe we think we’re in a boom and so we increase taxes to slow it down — again, Keynesian policy — but then the Fed will set interest rates lower than they would have done in the absence of the tax rises.

Fiscal policy doesn’t work in a world with an independent central bank, for that bank will always offset those macroeconomic effects of things like the budget deficit. The policy mixture will always end up being what the bank thinks it ought to be, for they’re the balancing item here.

Thus it isn’t that Jerome Powell is doing his job by ignoring Trump. Maybe Trump isn’t happy about that rate increase. Sure, it’s the third one this year. But Trump isn’t being ignored, the Fed is reacting to what Trump has done.

There was a package of tax cuts, which also hasn’t cut spending much, if at all. Thus, the deficit is blowing out. Our standard Keynesian model — recall, it doesn’t really matter if it’s right or not, given that all policy makers assume it is, that’s how they’re going to react — tells us that this will stimulate the economy. 

But then so also can monetary policy stimulate or slow down that economy. So, when fiscal policy is stimulating, monetary policy will be adjusted to be a bit more calming. The overall policy mix doesn’t, therefore, change.

My personal opinion is that Sumner is a tad over-reaching when he says that the two policies will always balance perfectly — I tend to not believe that any macroeconomic policy is that accurately calculated. But the underlying point is still true.

However much the Fed is annoying Trump by raising interest rates, they’re still doing it because of him. Trump’s tax policies have been a stimulus to the economy, therefore they’re raising interest rates faster than they would have done in the absence of that fiscal policy.

Tim Worstall (@worstall) is a contributor to the Washington Examiner's Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute.

Prevent the next Great Recession - responsible tax policy

Republicans in the US Congress have a rare opportunity to improve the quality of American life by creating government incentives for education and infrastructure investments.  Instead, their obsession is to cut taxes for the rich.~ Commentary by David Rosenberg
(The market is very expensive....)

Prevent the next Recession by investing in America

David Rosenberg, the chief economist and strategist at Gluskin Sheff, said the Republican plan to stimulate the economy with tax cuts likely will push the Federal Reserve to raise interest rates faster than normal. 

That may mean bad news for stocks, which already are trading at higher-than-average valuations.

“Why would you stimulate fiscal policy heading into the ninth year of a late-cycle expansion?” he said in an interview on the Financial Sense Newshour podcast. “Why wouldn't you save your policy bullets from a fiscal perspective to also fight the next recession?”

While wage growth has been sluggish during the recovery since 2009, the unemployment rate is at a 17-year low of 4.1 percent, the Labor Department said last week. 

Average hourly earnings rose 2.5 percent from a year earlier. Faster gains in paychecks would help consumer spending, which accounts for about 70 percent of the economy.

“This is going to put the Fed in a bit of a box because… this is (economic) stimulus with a 4% unemployment rate heading into the ninth year of an expansion, which is going to cause the Fed to raise rates more than they otherwise would have,” he said. “The timing is really bad.”

The Republican-controlled Congress is in the final stages of approving a sweeping reform plan that will cut corporate and personal income taxes (MaineWriter: aka "tax cuts for the rich"). 

President Donald Trump, who was elected last year on a pro-business platform of tax cuts, jobs growth and infrastructure spending, is expected to sign the bill into law as early as this month.

Rosenberg said U.S. government debt levels are too high to make fiscal stimulus as effective as it was in the past.

“There's no doubt that the corporate tax structure has to be changed, but not at the expense of raising the deficit at a time when the deficit is already 3.5 percent of GDP and a time when the gross public debt is more than 100% of GDP," he said. “If we had a balanced budget and we had a national debt to GDP ratio that was closer to 60% than 100%, you get a much bigger bang for the buck.”

The Fed cut rates to record lows in 2008 as the collapsing U.S. property bubble led to a major financial crisis and the worst economic slowdown since the Great Depression. The central bank began to raise rates two years ago as the U.S. economy continued to expand, even if it was the slowest recovery in the post-war period.

Monetary policy set by the Fed has a greater effect on the economy and asset valuations, Rosenberg said.

“I hearken back to the first tax cut engineered by Ronald Reagan in 1981 when he took the top marginal personal rate from 70% down to 50%,” Rosenberg said. “[Fed Chairman] Paul Volcker responded to that by raising rates and, quite unexpectedly and as a surprise to most economists at the time, we had a six quarter recession on our hands despite the fact that we had fiscal stimulus."

Stocks are expensive compared with historical trends for price-to-earnings ratios, he said. Publicly traded companies will need to post blowout earnings for the market to deliver gains as rates increase.

"The market is very expensive. Even with the tax stimulus, if you want to add on the $10 earnings per share with a lot of the goodies you'll get with the Senate and House version, you're still left with a 17.5 forward multiple for 2018,” he said. “Historically, the forward multiple is 15 and 17.5 is really what the peak was back in 2007. The multiples tell you that those expected returns are seriously constrained at this moment.”