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President Donald Trump rolled back tariffs on a number of grocery staples, like beef, coffee, and bananas late last week in what is being called a “sharp reversal” of his economic policy. He even admitted that tariffs do increase prices “in some cases,” but he also insisted there is “virtually no inflation” in America.
Inflation, as many grocery store shoppers and consumers in general have seen, is “persistent,” according to economist Justin Wolfers. Officially, U.S. inflation rose to 3.0 percent in September, about the same level it was at when President Trump took office. Trump campaigned on a promise to reduce prices on day one.
Wolfers spoke to ABC News, which showed that prices on some grocery items have risen by double digit percentages: for example, coffee is up 18.9 percent, beef is up 14.7 percent, and bananas are up 6.9 percent.
“So, so far we’ve seen rising inflation — well, not really rising, sorry, persistently high inflation,” Wolfers told ABC News. “That’s one of the things that’s kept interest rates high.”
President Trump has repeatedly criticized Federal Reserve Chairman Jerome Powell for not lowering interest rates more. Economists warn that lowering interest rates could increase inflation.
“The other thing that happens when you’ve got across-the-board, tariffs, is it reorganizes supply chains. Something that we sometimes call a ‘supply shock,’ Wolfers explained.
The New York Times on Wednesday reported that “President Trump’s sweeping tariffs took a toll on trade in August, as imports dropped 5.1 percent.”
Wolfers then warned about seeing signs of “stagflation,” a term popularized in the 1960s and 1970s.
“We’re seeing the early stages of what economists call ‘stagflation’ — the ‘flation’ part is inflation, and you’ve all felt that at the grocery store,” he explained.
“The ‘stag’ part is stagnation, which is, we’ve got rising unemployment and slower economic growth than we otherwise would have.”
Trump’s tariffs have largely been blamed for slower economic growth.
Bloomberg News on Tuesday also warned on stagflation, reporting that Trump’s fight against the Federal Reserve — the president for months has said he wants Chairman Powell out, and on Tuesday said he already knows who he wants to succeed Powell — could trigger stagflation.