Donald Trump to fight inflation but his 2 ideas might be flawed

Donald Trump, the former President of the United States and current Republican presidential nominee, said he will ‘end’ inflation in his campaign promises.

While inflation is cooling off, reports indicate that several essential costs, not part of CPI, are still high. Meanwhile, Trump’s proposed solutions to fight inflation might just do the opposite for the American consumers.

Trump wants to ‘end’ inflation

Donald Trump, former POTUS and Republican presidential nominee, said “I will end inflation.” During his campaign in Las Vegas, Trump promised to bring back the ‘American dream‘ and stop the ‘invasion.’

I was in Las Vegas this evening with a message of hope for all Americans—With your vote in this election, I WILL END INFLATION, I WILL STOP THE INVASION, and I WILL BRING BACK THE AMERICAN DREAM! Together, WE will MAGA!!! Thank you, NEVADA! pic.twitter.com/cgt8lb0lIi

— Donald J. Trump (@realDonaldTrump) October 25, 2024

While Trump wants to tackle inflation, it is already cooling off. According to Bloomberg, the CPI rise until September this year is 2.4%, the smallest since 2021. But there is a problem. While inflation has cooled down in 2 years, major goods and services excluded from the barometer are still pricey. For instance, insurance premiums and interest on loans.

Independent research by KFF indicates that between 2003 and 2023, family health insurance premiums have risen faster than both overall inflation and workers’ earnings.  Between 2003 and 2008, premiums grew by 40%, while inflation and earnings rose by only 16% and 17%, respectively. The cost of premium is just one example.

Steve Reed, an economist with the Bureau of Labor Statistics, explained to the paper that while the CPI measures the cost of goods and services people consume, it doesn’t cover all expenses impacting the overall cost of living. Matthew Sigel, the Head of Digital Assets Research at investment firm VanEck, recently noted that household electricity bills are rising faster than the general inflation rate. Therefore, Trump’s statement about taming inflation cannot be standalone.

Inflation could rise with Trump’s proposals

Trump’s proposed plan to ‘end’ inflation also comes with other promises like blanket tariffs and removing income tax. Adam Cochran, partner at Cinneamhain Ventures, explained that the idea is bad for general inflation. He adds that since tariffs are levied on US consumers, American buyers would pay more for imported products.

Cochran also underlines that Trump’s proposed tariffs of 20%-60% would raise prices on most goods, offsetting any benefit of tax relief. Since income tax is based on the level of income and tariffs are on broad-based buying, the proposal seems flawed to fight inflation.

The rate at which prices for goods and services generally increase, reducing the purchasing power of money, is known as inflation. Interest rate changes are just one of the many traditional and non-traditional instruments that central banks can use to manage inflation. Since 2013, the Consumer Price Index for All Urban Consumers (CPIAUCSL) has been divided into the pre-covid and post-covid periods.

The rise in inflation before 2020 was more gradual. After 2020, inflation rose sharply. The inflationary rise includes costs that individuals and businesses face, even if not part of the index. Meanwhile, none of the current proposals will ‘end‘ inflation. Instead, it could potentially increase the cost of goods and services.