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President Donald Trump made a campaign promise to lower prices on Day One. Well, it’s Day 24, and as anyone who has gone shopping for eggs lately knows: Prices aren’t any lower than they were on Inauguration Day.
In fact, inflation rose much more than expected last month, the Bureau of Labor Statistics reported Wednesday – rising another half percentage point last month overall, buoyed by surging fuel and egg prices. It was the biggest monthly increase since August 2023. And prices were 3% higher year-over-year for the first time since June 2024.
Yes, Joe Biden was president for 19 ½ of the 31 days the report covers, so much of America’s renewed inflation pain rests on the former president’s shoulders. But the bad inflation report also depicts a difficult political reality for the new president: Prices aren’t falling now that Trump is in office; they’re actually rising faster.
Trump’s campaign promise was doomed to be broken from the moment he made it. No president can wave a magic wand to lower prices, and for that matter, Trump has been unlucky: Oil prices have been on the rise on concerns about tensions in the Middle East and on sanctions against Russia and Iran. And avian flu sent egg prices more than 15% higher last month – the biggest surge since June 2015.
Prices were up across the board last month, though – not just those volatile and hard-to-control categories like food and fuel. There’s no way to spin this; January’s inflation report was just plain bad, and Trump is starting to own high prices.
A CBS poll this week showed that nearly two-thirds of Americans think Trump hasn’t focused enough of his policies on reducing inflation. And a University of Michigan consumer survey released Friday showed that Americans’ inflation expectations for the year ahead surged this month.
Trump’s plan to lower inflation
Trump does have a strategy to lower inflation, though. The president has spelled out a four-part plan to get prices down for American consumers.
1) Lower taxes within America’s borders, incentivizing companies to do business there.
2) Raise taxes on businesses outside of America (that is, tariffs), bringing in revenue that will both pay for the lost proceeds from lower tax rates and drive more American manufacturing to grow the economy.
3) Produce more oil to lower energy costs to defeat inflation.
4) Cut spending, primarily via Elon Musk’s Department of Government Efficiency, to lower interest rates to reduce costs for businesses and consumers.
Kevin Hassett, a White House economic adviser, told CNN Wednesday that Trump is already taking action on prices. For example, he claimed DOGE found $40 billion worth of spending to cut, although that amount remains hard to verify.
“We’re focusing on getting spending under control and having supply-side tax cuts and regulatory policies and drilling and so on, so that there’s a lot of supply-reduced demand,” he said. “That’s how you get prices down at the more macroeconomic level.”
Hassett also noted that the administration is working on a plan to combat the avian flu that has disrupted egg supplies and driven prices higher, although he didn’t share any specifics.
At least one of those policies can have and appears to be having an immediate impact on consumers. For example, the 10-year US Treasury yield has fallen since Trump was inaugurated, partially in anticipation of spending cuts, helping to lower mortgage rates a tad – from just above 7% on average the week before he took office to just under 6.9% last week.
But other policies either haven’t been introduced or aren’t working – at least not yet. Remember: Just because Trump has a plan doesn’t mean it will work. Biden spent most of the past two years working to fight inflation, but it was ultimately the Federal Reserve’s historically high interest rates that brought inflation down from 40-year highs.
Casting doubt on Trump’s inflation-fighting plan
Mainstream economists and policy experts remain dubious about Trump’s plan.
Cutting taxes could be done with a simple majority of Republicans through a process known as budget reconciliation. But there’s already infighting and a disagreement between Senate and House Republicans about the best approach to take on tax cuts. So the timing and scope remains unclear.
And though tax cuts could save Americans money in their take-home pay, they could ultimately raise loan rates. For example, Trump’s 2017 corporate tax cuts gave the economy a boost, raising wages and productivity, but the benefits were not nearly enough to offset the losses in tax revenue that have widened the US deficit, according to an analysis from Chicago’s Booth School of Business.
Trump plans to pay for tax cuts with tariff revenue and by cutting government spending. But the math doesn’t add up. The Committee for a Responsible Federal Budget last week estimated Trump’s tax cuts would cost between $5 trillion and $11 trillion. Even if Trump enacts his most aggressive tariff plan, the expected revenue would be in the hundreds of billions of dollars. Elon Musk has recently said he is targeting $1 trillion in spending cuts – an incredibly high number that would likely involve cutting popular social services like Medicare and Social Security. And the timing of when those savings could be realized remains unknown because of mounting legal challenges – and much of the money for contracts that were eliminated may have been allocated already.
So if Trump gets his tax cuts through, the government will almost certainly have to borrow even more money in the form of Treasury bonds. That will flood the market even more with bonds, reducing their price and sending yields higher. And yields are pegged to all kinds of consumer loan rates, including mortgages.
Tariffs themselvespresent a problem: Mainstream economists agree that American importers, not foreign exporters, pay their costs. That means those costs get passed on to American consumers, which can reignite inflation and hurt the economy.
And Trump’s energy plan is also problematic: He can open up as many oil fields and offshore sites for drilling as he wants – it will remain hard to pump more oil. Demand is weak around the world, as economies, particularly China, struggle with inflation and slow growth. Meanwhile, the United States is already producing more oil now than any other country at any other time. Energy companies are not clamoring for new oil drilling leases, as evidenced by Alaska’s recent wildlife refuge drilling auction receiving zero bids.
Lastly, Trump’s demand that interest rates fall is something largely outside of his control. On Wednesday, Trump posted on Truth Social, “Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!!! Let’s Rock and Roll, America!!!”
Trump didn’t specifically mention the Federal Reserve, and Hassett suggested Wednesday that Trump was pushing to lower the 10-year Treasury yield rate (which, as noted above, could be complicated by tax cuts).
But Trump has repeatedly tried to exert more direct control over the Federal Reserve’s interest rate decisions and has called out Jerome Powell, the Fed chair Trump appointed in his first term, for not lowering interest rates faster. Trump has repeatedly denied speculation that he would try to fire Powell.
The Fed may ultimately reduce rates whether or not Trump wants it to. But with inflation numbers like Wednesday’s report, it’s not looking likely anytime soon.
CNN’s Elisabeth Buchwald contributed to this report.
