Remember those delicious lattes and that new pair of shoes you have been eyeing? When you think about running errands next, keep in mind that the changing economy may affect your budget. As the holiday season approaches, shopping is at the forefront of people’s minds. The holidays bring a commercial push for extra consumption, which, even in great economic conditions, places a strain on the average wallet. In the past year, Consumer Price Index data indicate that the prices for many goods and services have been rising. In addition, tariffs have increased the cost of products produced overseas, of which we are the world’s largest importer. Will rising costs be just another minutiae of life or force you to drop your favorite products? Here is what the federal government is doing and what it means for the economy.
First, let’s break down the Consumer Price Index (CPI) data for a couple of services used most often by Vanderbilt students. In the past twelve months, the CPI for restaurants has increased by 3.9%, and similarly, commercial airline tickets have increased by 3.3%. These figures exceed the Federal Reserve’s 2% target rate. What does this mean for your daily life and budget? These CPI indicators point to emerging inflation at a steady rate. For many, consumer products are becoming out of reach, especially non-essential goods and services. Even though these products can be classified as “non-essential,” small luxuries that the average consumer has access to, such as restaurant outings or short trips, could become unattainable among the middle class.
As the holiday season approaches, gift shopping is expected to be hit hard by tariffs. Analysts at LendingTree estimate that prices will be higher, possibly costing shoppers an additional $186 on holiday gifts alone. Clothes, electronics, and even artificial Christmas trees will put a bigger dent in your budget than last year. The objective in President Trump’s tariff policy was to incentivize companies to bring industry back to the U.S. While these higher tariffs may motivate large corporations, it is unclear whether domestic production would circumvent higher prices. New legislation regarding tariffs on Chinese imports, however, demonstrates promising reform. In the past few weeks, the president signed an order that effectively reduced tariffs on food staples, including meat, fruit, and coffee. Fortunately, this development may help families get better deals on their groceries. Lower tariffs will reduce the wholesale cost for retailers, therefore encouraging them to keep consumer prices down, or at least abstain from raising them.
Some may argue that the public’s economic struggles reached their peak during the pandemic. While this is valid, the disparities of over five years ago continue to impact the middle and working classes, feeding into increased financial inequality. Both the economic challenges of the pandemic and newly imposed tariffs have influenced the emerging economic landscape. Inherently, neither of these factors is isolated, and the administration’s previously implemented tariff policy is not ameliorating conditions for the average consumer.
Economic legislation passed by this administration should, in the near future, be committed to mitigating inflation. This administration does, however, exhibit some commitment to economic policy reform, which can likely be attributed to Democratic wins in local elections across key states involving candidates who prioritized consumer affordability in their agendas. The Republican Party’s underperformance has placed pressure on the president to roll back tariffs, an initiative that appears to be supported by a majority of voters in the recent elections. Moving forward, federal policy should facilitate a positive perception of the electorate’s economic experiences. As one of the most complex and salient issues for the public, tariffs and resulting inflation significantly burden presidential approval ratings and must be managed thoughtfully.
