United States inflation topped 4 percent for the first time in three years in the latest consumer price index reading, with energy prices — particularly gasoline — driving the spike. The data arrived on the same day that President Trump, asked about rising prices, declared “I love the inflation” — a remark his allies scrambled to contextualise. The BBC reported that prices were rising at their fastest rate in three years, while Al Jazeera characterised it as US inflation hitting a new three-year high. The White House’s response was muddled, with House Speaker Mike Johnson reportedly attempting to defend the president’s comment in real time on social media.
The received wisdom
The standard progressive case on Trump and inflation has the structure of a morality tale: tariffs are a tax on consumers, energy policy serves fossil fuel donors at the expense of households, and an administration that cheers rising prices is simply indifferent to the working class it claims to champion. This framing is not without merit. The correlation between the current administration’s trade policies — particularly the broad tariff regime on imported goods — and the resurgence of consumer price pressure is hard to deny. The Federal Reserve, having largely tamed the 2021-23 inflation wave, now faces a second test of its independence and its tools. The argument is that Trump has deliberately constrained the supply of cheap imports while simultaneously stimulating demand through tax cuts, and the predictable result is inflation — a consumption tax that falls disproportionately on lower-income households who spend a greater share of their income on goods and energy.
A different read
There is something to that account, but it flattens what is actually a more complicated picture. First, the proximate driver of the current CPI spike is energy prices, and the proximate cause of energy price pressure is the US military campaign in and around the Gulf of Oman — which, as yesterday’s tanker incident demonstrated, is now directly affecting shipping routes. A president who wages war in an oil-producing region and then expresses surprise at gasoline prices is not primarily a victim of his own trade policy; he is a victim of his own foreign policy. These are different analytical problems with different solutions.
Second, and more importantly: “I love the inflation” is a statement that deserves to be taken seriously rather than merely mocked. It is possible — likely, even — that Trump was speaking loosely, meaning something like “I love what inflation tells us about economic activity” or “I’m not afraid of a bit of inflation if wages are rising.” American presidents frequently say things that their communications teams then have to translate into coherent policy positions. But it is also possible that the statement reflects a genuine indifference to price stability as a policy goal — and that indifference, if it characterises the administration’s actual posture toward the Fed, would be enormously consequential.
The historical analogy that should concentrate minds is the Nixon-Burns episode of 1971-72. Nixon pressured Fed Chairman Arthur Burns to keep rates low ahead of the 1972 election, contributing to the inflationary psychology that ultimately required the Volcker shock of 1979-82 to break. The lesson policymakers drew from that episode was that central bank independence is not a technocratic nicety but a political backstop against the short-termism of elected officials. The current administration’s relationship with the Federal Reserve has been persistently adversarial. If that adversarialism curbs the Fed’s willingness to act decisively on a second inflation wave, the long-term cost to working Americans — measured in purchasing power erosion and the eventual pain of a harder landing — will dwarf any short-term boost from tariff revenue or fiscal stimulus.
There is a third dimension that the progressive critique tends to underweight: the structural inflation embedded in the administration’s own industrial policy. Onshoring manufacturing — a goal with genuine bipartisan support — necessarily involves paying American wages and building American facilities at American costs. That is not a bug of the industrial policy; it is a feature. But it means that the same politicians who denounce inflation are pursuing policies that will structurally embed higher costs into the supply chains of goods that ordinary Americans buy. Voters should be told this honestly. Tariffs are a price. Onshoring is a price. You can argue the price is worth paying for strategic reasons; you cannot argue there is no price.
What Trump’s comment — whether deliberate or throwaway — actually revealed is the central tension in populist economic nationalism: it promises cheaper prices (by ending “globalist” trade deals) and higher wages (by bringing jobs home) simultaneously, when in fact those two goals are in tension. Higher wages and protected domestic industry mean higher prices. The sugar-coated version of economic nationalism, which promises all of the benefits and none of the costs, will eventually collide with a 4-percent CPI reading.
What to watch
- Whether the Fed proceeds with rate adjustments at its next meeting, and whether the administration applies pressure — public or private — to influence that decision.
- The July CPI print: if gasoline prices remain elevated because of the Gulf conflict, a second consecutive elevated reading will shift market expectations in ways that affect mortgage rates, auto loans, and business investment.
- Whether Republican members of Congress — particularly those facing re-election in high-cost-of-living districts — begin to distance themselves from the president’s framing, as happened during the 2021-23 Biden inflation wave.
- Whether the administration’s framing shifts toward supply-side explanations (blaming Iran, blaming OPEC) rather than demand-side ones, which would signal that “I love the inflation” was indeed a one-day miscalculation rather than a policy signal.
— J