Q&A – The Cost of Inflation Under Biden & Tariffs Under Trump
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Today’s Entry: Hi Brian, I listen to your show every morning and continue learning new things, thank you for your good work on WJNO.
I have a question and a comment:
Question
I’d be curious to know what the cost was/still is to every American during the Biden administration due to inflation that was caused by the stimulus checks, the IRA, ending Medicaid work requirements, illegal expansion of Obamacare along with other numerous EO actions Biden took. There must be a cost per citizen - not taxpayer - due to Biden’s liberal agenda.
Comment
I realize it must be difficult to guesstimate what the cost to every citizen will be with Trump’s tariffs until such time they actually become realized of which I’m certain there will be added costs. My point here is the liberals and MSM are proclaiming doom-and-gloom due to Trump’s tariffs and if my memory is correct I don’t recall the liberals and MSM making similar claims during the Biden administration when Congress and Biden were signing off on all of these programs that led to higher prices and record 40-year high inflation.
Bottom Line: Your instincts are right about this with one potential caveat that I’ll address. It’s widely known that President Biden’s administration produced the highest rate of inflation in a long time. Therefore, it should come as no surprise that the average inflation rate during his administration was the highest since Jimmy Carter. Carter is still the record holder for presidential inflation rates (and not in a good way) with an average 9.9% inflation rate during his four years in office. President Biden’s average inflation rate paced almost exactly half of that with a 5% rate during his four years – a number that was double President Trump’s 1st term inflation rate of 2.5%. But even then, that’s only a small part of the picture.
What’s known as Real Per Capita Disposable Income, in other words how much money you have left after you’ve paid the bills, rose during each of President Trump’s four years in office during his first term, growing by an aggregate 20% during his four years as president. Meaning, that by the end of his presidency, the average American had 20% more disposable income than they did prior to his presidency. It was one of the greatest four-year periods in modern American history for upward mobility. How did the average person fare during President Biden’s four years? In addressing today’s question...available disposable income dropped by 4% making the Biden administration one of only a few in American history where the average American was worse off by the end of it than they were at the start of it.
In terms of lost buying power, the median household lost an average of $3,140 annually during the Biden administration...or in other words, the average household lost a total of $12,560 due to ‘Bidenflation. That was an awfully expensive vote for those who put him into power. But what about the Trump tariff policies. Will they necessarily add to inflation? Probably not nearly to the extent that people may think.
During President Trump’s first term as president, he placed reciprocal tariffs on all of the US’s largest trading partners including:
- China, Canada, Mexico, the entire European Union, Brazil, Argentina, South Korea and India
What was the impact on inflation? A comprehensive study of the Trump tariffs from the Economic Policy Institute showed that the tariffs had a 0.3% impact on the prices that Americans paid for goods. In other words, the impact was negligible, and the Trump administration's inflation rate was the fourth lowest in American history overall.
The reason the impact wasn’t bigger is largely due to what President Trump was hoping to achieve. More goods being made in America. Trivia time. What is the most recent net cost savings of manufacturing in China compared to the United States? The answer is only 2.2%. There was a time when savings of up to 50% were achieved through offshore manufacturing. Those days are largely gone. As the cost of shipping has dramatically increased in recent years (just think about how much more you have to pay to ship a package today compared to five years ago – then imagine being a major importer), the cost benefit of the cheap labor achieved overseas in countries like China has increasingly been diminished. While 2.2% cost savings isn’t nothing... It’s also not nearly as compelling of a reason to manufacture a product in China as opposed to within the United States. As a result, the tariffs continue to have a reduced net effect on what we pay overtime.
So, in the most literal sense is the tariff battle likely to lead to higher prices? Maybe but at most it’s likely to be negligibly. In fact, despite the implementation of tariffs by Trump when he returned to office, the rate of inflation has only fallen since he became president from 3.0% to 2.8%. As always there are two sides to stories and one side to facts... These are the facts.