Trump said he got elected on grocery prices. But then much of what he has done has had the effect of only raising prices and worsening inflation. Of course we’ll never know what might have been, but it’s highly likely inflation would be easing a bit by now. Let’s look at the two main factors fueling this new wave of inflation.

Tariffs

It’s pretty well-understood at this point that it’s Americans that bear the brunt of paying for tariffs. Trump has suggested that producers should “eat” the cost of the tariffs. There are of course some overseas manufacturers that will do that or will at least partially do that. But in many cases that’s just not feasible if the manufacturer wants to stay in business.

Case in point, we know Walmart is notorious for negotiating deals with miniscule margins. Manufacturers jump to be a Walmart supplier but with that promise of great quantity comes a very slim margin. Walmart is known for pushing for that last fraction of a percent on these deals, and there’s simply no room to give, either on the manufacturer’s side or on Walmart’s side if they want to maintain current pricing.

The tariff price increase is already obvious on some items with prices sometimes 2x higher than before. Now that 2x increase is probably unmerited but it does allow other items to not go up as much. Or heck, maybe it’s just profit taking with Walmart knowing we’ll just blame inflation.

Immigrant labor

Like it or not, the US economy has been very dependent on using low cost immigrant labor. Lots of businesses rely on this cheap labor to keep prices to the consumer low. This has for decades been all wink-wink-nod-nod with the government finding ways to look the other way when a business is employing a significant number of undocumented workers.

In fact, schemes have been explicitly concocted that allow a farmer to get his crops in before the false social security numbers come back. And when a bunch of them do kick back, there’s been no penalty, and the workers have moved on to the next farm. This has fueled a cottage industry of fake social security cards and it’s all been done with the knowledge of the government and the farmers and certainly no repercussions for the employers.

Now that we are demonizing immigrant labor, however, this low price labor market is evaporating as immigrant workers and employers no longer want to take the risk. As those employers have to find higher-priced documented citizen labor, those additional costs get passed along to you.

Some of these raised prices will seem very abstract. For instance, when a city can no longer hire a road building company underbidding others for a job because of low labor costs, they will simply build or repair less roads.

Some things will be middle ground: undocumented workers make up a key portion of the supply chain for meat so those prices will go up as the meat packers shift to using American labor. Don’t get me wrong, they’ll still use every way possible to keep labors costs down such as no benefits, under 40 hour work weeks to skirt “full time” provisions, and paying only the minimum wage which, as we know, has not kept up with inflation.

And then of course the obvious field workers that farmers have relied on to get their crops in. The farmer will need to charge more for his product, whatever it may be, making their product less competitive globally and certainly more expensive by the time it reaches the American dinner table.

Finally, at a more personal level, you and I are paying more for gardeners and nannies now. These jobs often done by undocumented immigrants because there’s a lot less red tape when taking a personal payment, often untraceable cash.

Where is tariff money going?

Finally, Trump has bragged about how much revenue the tariffs are bringing in but he hasn’t suggested that those tariffs benefit the average American tax payer in any significant way. There was briefly talk of a $2000 tariff payment but now he says he “doesn’t remember” talking about that. That one-time payment would barely cover the tariffs costs for one year.

We haven’t heard how it’s going to decrease the national debt. And we’ve only heard about programs being taken away, e.g. health care or foreign aid.

Reduced trade

One effect we haven’t heard much about is how it’s impacting the actual flow of goods into the US. Financial articles refer to “reduced trade volumes” but don’t go into detail how that will affect the American consumer. But economics 101 says prices go higher when the item is less available.

It will take years for American businesses to step in and fill the gap and experience suggests that American-made always costs more. Frankly, a lot of us don’t care where the TV is made, we just have gotten used to certain low price points and, also harking to basic economics 101, with higher prices we’ll just reduce discretionary spending for non-essential items. Good times, and more to come.