Now, a more expensive shoe is on the other foot. The US president claims inflation is going down, but it is in fact higher<\/a> than it was when he was elected. Hawks are once again ascendant at the Federal Reserve, warning that a rate cut in December is unlikely.<\/p>\n Meanwhile, even as Trump walks back some levies on grocery items like beef and coffee, double-digit tariffs are probably the new normal (history teaches it takes years to bring them down once raised). And many secular and cyclical trends beyond tariffs suggest a more inflationary environment.<\/p>\n Start with reshoring. Foreign direct investment in America\u2019s industrial base is pouring in from around the world. Capital expenditure is by nature inflationary, particularly when it\u2019s not paired with immediate productivity gains. And many of the investments being rolled out now, in areas from the automotive industry to shipbuilding to artificial intelligence and the energy grid upgrades needed to support it, are long-term bets.<\/p>\n These investments create a sea change that has been 40 years in the making. From the 1970s on, US economic policy was geared towards outsourcing costs (labour, manufacturing) to countries in Asia, in exchange for running deficits and providing the world with dollars. That entire paradigm \u2014 which was disinflationary \u2014 is now shifting. America wants to build again, and China and other countries want to move away from the dollar.<\/p>\n That truth complicates Trump\u2019s already floundering efforts to appease Maga voters who suffer disproportionately from affordability issues. If the US hollowed out its industrial base and stopped investing in supporting infrastructure in part because, as analyst Luke Gromen put it in a recent letter to investors, this \u201csupported the UST market, the USD, Washington deficits and Wall Street\u201d, then \u201ccommon sense suggests reshoring it will do the opposite on a real basis\u201d. I\u2019d very much agree.<\/p>\n Factory and energy capex isn\u2019t the only secular inflation trend ahead. Healthcare costs are also going up. It\u2019s no accident that the core of the latest government shutdown fight was about healthcare, and particularly Medicaid benefits. While much of the inflation conversation has been centred on tariffs, consumers can very often choose not to purchase items that are going up in price. They can\u2019t choose not to have a healthcare emergency, which in the US is a big reason for bankruptcy.<\/p>\n Healthcare is an issue that will affect everyone, not just the working class. One recent report by the strategy firm Mercer found that its costs are likely to rise by 9 per cent in 2026, and that employers will be making \u201cplan design changes\u201d to try to lower those rates by a couple of percentage points. That\u2019s code for \u201ccutting benefits\u201d and \u201craising co-payments\u201d, which means that individuals should expect less for more.<\/p>\n Like groceries, this is the kind of kitchen-table issue that very much resonates at the ballot box. You can see Trump trying to get ahead of it already, with things like TrumpRx, his proposal for a federally underwritten drug-purchasing website that is, ironically, straight out of the Obamacare playbook.<\/p>\n While we all knew that affordability would become Trump\u2019s problem, what we didn\u2019t know was that he would turn to the same policy tools that the Democrats have used to try to tackle the issue. Witness the idea of sending cheques to households (which the Biden administration did under the American Rescue Plan Act in 2021), or the president saying he\u2019s going to have the justice department investigate the meatpacking industry for driving up prices through \u201cIllicit Collusion, Price Fixing, and Price Manipulation\u201d, as he put it on social media.<\/p>\n This is literally what Lina Khan did while she was Biden\u2019s Federal Trade Commission chair, issuing a joint statement along with the justice department around monopsony power in the poultry industry, as well as calling out competition issues in meatpacking at the height of the Biden-era inflation increases in 2022. <\/p>\n Recommended<\/p>\n
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