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    ‘It’s going to be messy’: Americans on how Trump’s tariffs are shaping their spending

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    A few weeks ago, Dane began stocking up on “paper products”, “cases of paper towels, toilet paper”, “piddle-pads” for their shih-tzu, and his wife upgraded from an iPhone 8 to 14.The 73-year-old in South Carolina said the purchases – which were made to get ahead of Donald Trump’s trade policies – reminded him of the early weeks of the Covid pandemic, when he scrambled to buy masks, gloves and toilet paper.“It’s scary,” Dane said. “Prices are going to go up because of tariffs … It’s going to be messy.”While campaigning last year, Trump constantly touted his love of tariffs. But it was not until his so-called “liberation day” on 2 April – where the president announced sweeping duties on incoming goods, punishing competitors, allies and small and developing countries alike – that he spooked global financial markets and provoked fears of spiralling inflation and stagnant growth.Amid a US government bond sell-off, the president paused his most eye-watering tariffs for 90 days, apart from China, whose goods are set to be hit with a 145% levy.Hundreds of Americans got in touch with the Guardian to share how the uncertainty is affecting their consumption habits.Dane, who is retired, worked as an entrepreneur with his wife most of his career before later becoming an English teacher. He said he was a Republican in the 1980s but is fearful about how the US is “not going the right way” under Trump, and is unhappy with his “dystopian” policies towards global allies, the economy, education, scientific research and more.View image in fullscreenCurrently, Dane is on a trip to Paris and plans to bring home consumer goods potentially hit by 10% tariffs on European Union imports.“We’ll probably be getting tea, bringing back some cheese, some butter,” he said. “I would love to bring back eggs but that would be a disaster. I’d have scrambled eggs in my suitcase.”Amid tariff uncertainty, Heather, a 61-year-old college professor in Texas, said she and her husband can mostly weather food cost fluctuations, but brought forward the purchase of a new car “inanticipation of price hikes”.She said they owned a 14-year-old Mini Cooper, which ran on gas, that they planned to replace with a hybrid vehicle at some point. They decided to replace their car now to avoid potential inflation – and reduce expenditure on gas.“The economic instability of the Trump administration certainly gives one pause,” she said. “It’s just so much instability, chaos and [the] unknown.”It’s a similar story for Stefanie, a 56-year-old educator and former tech worker in Nevada, who bought a Toyota Tacoma to replace her old Jeep as well as converting some investments into cash.Stefanie began strategizing about being more resilient to tariffs as soon as Trump was elected.“The one thing I learned in the first administration is to believe him: he says bizarre things, and then he does bizarre things,” she said.She’s cutting back on subscriptions and future travel plans, while stockpiling kitchen staples such as rice, cooking oils, vinegar and flour and replacing worn-out clothes including shoes and jeans, “before inflation hits”.“The supply chain is so globalized that tariffs really hit everything,” Stefanie said.But for Ishaan*, a 51-year-old engineer in Texas, the economic picture means he is abstaining from major purchases.“Everyone I know has started tightening their belts,” he said. “I am cutting out unnecessary expenses, cancelled my gym membership, focusing on savings.”The focus for Ishaan, who fears higher prices and an economic slowdown, is to build up his savings in cash. He feels “scared to invest in any stocks or bonds right now” amid market volatility.Likewise for Jonathan*, a 70-year-old in New Jersey, the financial fallout from Trump’s trade wars means he has been forced to rule out planned purchases and strip consumption back to the essentials.Jonathan said his individual retirement account (IRA) was initially “decimated” – although it ticked up slightly after Trump paused his tariffs on Wednesday. He said it was currently down about 15%.That means cancelling plans to redo the carpet in his house and replace two old televisions, Jonathan said. “In short, we’ll buy only necessities and pay bills until this stupidity ends.”Russ a 35-year-old physicist in New Mexico, said the Trump administration’s policies were “causing me to think about what kinds of spending behavior I could have done without this whole time”.He has an eight-year-old phone and nine-year-old MacBook computer that still work fine, which he will not be replacing. The prospect of runaway price rises for consumer electronics, often from China, have led him to reconsider: “Do I really need this, or do I just want this?“I see these things as being as much toys as necessities,” he said. “Maybe I’ll just go back to a dumbphone or something like that – I fantasize sometimes about not getting all these notifications all the time, like the phones we had back in 2005. But maybe that’s a Luddite fantasy.”Russ said that he was already boycotting Amazon and Target – companies that many feel have aligned themselves with Trump’s agenda such as rolling back their own DEI schemes. He’s trying to shop more at local, independent shops rather than “everything stores”, which he notes is more expensive and time consuming but ultimately worth it.“As an American citizen and registered voter, nobody really cares what you think until November of every other year, you feel kind of voiceless,” he said. “You think, well, if dollars are the only tools we have any more, then damn it, I’m going to cast those votes and allocate my spending accordingly.”View image in fullscreenLikewise, small business owner Christine* said the disruption could cause a wider re-evaluation of US consumer habits.Amid the uncertainty, Christine, 41, stocked up on supplies for her Miami acupuncture business for two years, and bought her son’s fifth birthday present – a bike – early for July. But she said she had already noticed less demand for her work.More broadly, the prospect of inflationary tariffs is accelerating Christine’s reconsideration of how much “stuff” she needs. She’s recently attended “these lovely parties” where friends bring unwanted clothes and they “switch it all around” rather than buying fast fashion.“I really resent being drafted into this mad trade war,” Christine said, “but if there is a silver lining, maybe it’s that at least some people like me will question their unsustainable capitalistic practices.”*Some names have been changed. More

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      Corporations are forcing Americans to pay more for less – in their own words | Matt Stoller

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      In 2022, the Biden administration and the oil industry were in a brutal fight over oil prices. The president was demanding that domestic oil producers invest and drill more to address spiking costs, but Texas frackers were recalcitrant. “Whether it’s $150 oil, $200 oil, or $100 oil, we’re not going to change our growth plans,” the Pioneer CEO, Scott Sheffield, said, echoing comments from other leaders at different domestic firms. Profits would go to investors, not to more rigs to address pain at the pump.The oil barons won the fight. Profits in the oil industry jumped from virtually nothing in 2020 to the hundreds of billions in 2021, and then doubled again in 2022. And yet, economists did not see any sort of plot at work. “Don’t blame the oil companies for their high profits,” said the economist Olivier Blanchard. “It is not price gouging, just how markets work.”Three weeks ago, the Federal Trade Commission released information showing how naive such statements really were. Sheffield, it turns out, allegedly helped engineer a price-fixing scheme to reduce oil production and increase prices for Americans at the pump. His goal was to end fierce competition in the industry, which had, as he put it, “lowered the price by $20 to $30 per barrel over the past 10 years”. The FTC banned Sheffield from his corporation’s board and has reportedly referred allegations against Sheffield to the Department of Justice for possible criminal investigation.The magnitude of this alleged plot is stunning. Oil prices are controlled by the Organization of Petroleum Exporting Countries (Opec), a cartel composed of nations with known oil reserves. Because Opec is made up of governments, price-fixing law doesn’t apply. But these laws do apply to domestic US firms engaged in shale oil production, who competed fiercely with Opec from 2014 to 2016 for market share, bringing down prices in the interim.In 2017, tired of this price war, Texas oilmen and Opec officials began sitting down to dinners, and by 2021, Texas had de facto joined Opec. Companies like Pioneer, Devon Energy and Continental Resources publicly pledged to hold back production. As the FTC found, Sheffield was also privately sending hundreds of text and WhatsApp messages to Opec officials, seeking to align US producers with the global cartel.Class-action lawyers are on top of the scandal, but there’s also increasing political interest. At a hearing last week, the US representatives Rosa DeLauro and Matt Cartwright began criticizing “big oil” for this scheme, and Representative Mark Pocan even called for jail time for the oil executives allegedly involved. The top Democrat on the powerful energy and commerce committee, Frank Pallone, just launched a wide-ranging investigation across the industry.The US consumes 7bn barrels of oil a year, meaning that if the dollar amount went up by $20-30, as Sheffield calculated, that’s roughly $400-700 a person in America, a transfer from consumers to oil men and their private equity backers. That’s a not small amount of what inflation wrought in 2021, which was about $4,700 per capita in increased prices. (I suspect the amount is actually more than $20-30 a barrel, since price spikes tend to be larger than the average over long periods of time. But we’ll leave it at what Sheffield calculated.)What is perhaps most shocking about this scandal is not that it happened, but that it happened in plain sight. Oil CEOs weren’t hiding. In 2021, as prices rose on the end of Covid lockdowns, Sheffield publicly threatened rivals who might increase production, saying “all the shareholders that I’ve talked to said that if anybody goes back to growth, they will punish those companies”.For years, there has been a debate between macro-economists like Blanchard about the source of post-Covid inflation. Many economists chalked up price hikes to workers demanding more money and saw the way to address it as scaring workers into accepting less money by throwing a bunch of them out of work. “We need five years of unemployment above 5% to contain inflation,” said Larry Summers. That’s what their models told them.By contrast, 85% of Americans, along with a few iconoclastic scholars and writers, said “corporations being greedy and raising prices to make record profits” was the cause of inflation. Why? Well it might have been because they noticed that CEOs were routinely telling investors that they were raising prices to increase margins, not to meet wage demands. Or it might have been because they experienced large and unexplained price increases in meat, rent, hotels, groceries and restaurants. Indeed, when the CEO of Wendy’s recently said Wendy’s was considering using AI to engage in dynamic pricing, the public outrage was palpable.It’s time to declare the debate over. In 2021, the total corporate profit increase was $730bn, or a little over $2,100 a person. That’s a large chunk of the inflationary increase in costs. Moreover, the price-fixing in the oil industry, which contributed roughly $200bn of that, isn’t an anomaly.Take post-Covid rent hikes. One software and consulting pricing firm for landlords, RealPage, specialized in telling its clients to hike rents more than they otherwise might. As of December of 2020, RealPage had nearly 32,000 clients, including “10 largest multifamily property management companies in the United States”. There are multiple antitrust suits accusing the private equity-owned firm of organizing a massive price-fixing conspiracy to inflate rents across the board.Beyond rent, the Biden administration or private plaintiffs now have credible antitrust claims against firms engaged in price-fixing in meat, hotels and large online sellers like Amazon. Corporations in a range of industries have made comments similar to those of Sheffield.Alex Cisneros, an executive for Red Roof Inn, told a trade outlet that Red Roof Inn was using a software package called STR from CoStar to systematically hike prices across the hotel industry. “Red Roof’s franchisees for the most part are making more money with less occupancy,” Hotel News Now explained. “Red Roof is now providing more data to franchisees to educate and get them comfortable commanding higher rates.”According to a lawsuit, an unnamed executive at Smithfield, a pork processor, summarized the advice he got from Agri Stats, a consulting firm that coordinates production in the industry, as: “Just raise your price.”Rent, meat, oil and hotels are big sectors, so criminal activity in the form of price-fixing to boost profits should bust through the illusions economists have about how our markets really work. There are also a number of concrete steps policymakers can take to respond to this price-fixing.The first is to arrest or sue the offending executives for criminal activity.The second is to strengthen price-fixing and merger laws, allow more private class-action suits, force judges to speed up cases and increase the budget of antitrust enforcers to make collusion more difficult.The third is to reform the Federal Reserve so policymakers there stop using macro-economic models that avoid considerations of profits and price-fixing.And the fourth is, frankly, political. One key reason there is action on these schemes is because Biden has prioritized antitrust enforcement. He hasn’t put enough into antitrust, and he doesn’t talk about it very often. But he should, or else Americans are likely to fall into the trap of thinking that what is good for big business is good for their pocketbooks, when the opposite is so often the case.
      Matt Stoller is a writer and former policymaker who focuses on the politics of market power and antitrust More

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      Why is US inflation so high – and how long will it last?

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      Why is US inflation so high – and how long will it last? Soaring prices a top concern for many Americans, and likely influencing many voters in a midterm election year Inflation in the US is at a 40-year high – an astounding 9.1% year-over-year, according to a government report released Wednesday.Prices have climbed every month, while consumer confidence has hit record lows. Inflation is now a top concern for many Americans, and is likely influencing many voters in a midterm election year.What is driving this inflation, however, is not new: rather, it is largely the fallout of two years of the Covid-19 pandemic. Here is what we know.Why is inflation in the US so high?The Covid-19 pandemic strapped the US economy on to a rollercoaster. In early 2020, nationwide lockdowns caused millions of Americans to be temporarily laid off from their jobs. Then president Donald Trump responded by signing a $2tn aid package aimed at directly helping businesses and individuals, including stimulus checks that put money directly into people’s pockets. It would ultimately be the first of three stimulus packages, together pumping an eye-watering $5tn into the economy.That summer, businesses slowly started to reopen. But it would take another year and a half for the unemployment rate to fall back to where it was before the pandemic, and with wages rising due to a tight labor market, consumer spending started to climb: people wanted new homes, restaurant meals, appliances and furniture.As the demand for goods soared, supply remained constrained – because of the infamous supply chain crisis, which is only just now starting to ease. At the peak of the crisis, ports were clogged with ships trying to dock, containers were falling into the ocean and there was a shortage of truck drivers. The war in Ukraine, along with China’s own coronavirus lockdown in the spring of this year, also played roles in keeping supply tight during 2022. That means higher prices.What sectors are driving inflation?Gas, food and housing prices have all soared, according to the US Bureau of Labor Statistics. Year-over-year, gas prices are up 7.5% – though Joe Biden has called the inflation rate “out-of-date”, as gas prices have been falling the last few weeks.Prices have also gone up at grocery stores, particularly for fruit, vegetables and non-alcoholic beverages. Grocery prices over the last year have risen 12.2% – the highest increase since April 1979. Home prices and rent have increased too – up 5.6% compared with last year.How long will inflation last?No one can really predict, nor do we know if it has peaked, because so many factors are at play. Gas prices are going down, it’s true, but it’s unclear whether that will be enough to send inflation downward as well.The Federal Reserve, headed by Jerome Powell, has been aggressive in its response to inflation, raising interest rates twice this year. Early reports indicate that the Fed is looking at yet another three-point interest rate hike at the end of the month.What are the lasting effects of inflation?High, long-lasting inflation is worrisome because it decreases the value of currency, weakening the purchasing power of the American dollar and eroding savings.The Fed’s control of interest rates is its most powerful tool to curb inflation. But it is a tough balancing act, as it risks a recession. A slowdown in investments could have a cascading effect on jobs and spending, though it remains too early to predict any recession – not that that has stopped certain people, and banks, from doing so.And there are some things inflation doesn’t necessarily affect. The unemployment rate has held steady at 3.6% – around the same rate as before the pandemic. And the economy has shown other signs of resilience – particularly in jobs, which grew 372,000 in June.TopicsUS economyEconomicsConsumer spendingFederal ReserveBiden administrationUS politicsexplainersReuse this content More