What Could Trump's Second Term Mean for Your Wallet? A Look at Inflation Trends and Economic Policy

When it comes to inflation, Americans face a critical question: how will the incoming Trump administration shape the prices you pay at the pump, grocery store, and beyond? To understand where inflation might head, it’s worth examining the economic track records of recent presidencies and the policy choices that influence price levels.

Biden’s Inflation Challenge: Context Matters

During President Biden’s tenure, the year-over-year (YOY) inflation rate averaged 5.2%—the third-highest among presidents since Eisenhower. However, this figure doesn’t tell the whole story. Biden inherited extraordinary circumstances: he was forced to sign the $1.9 trillion American Rescue Plan stimulus in 2021 and faced spiking energy prices following Russia’s 2022 invasion of Ukraine. These external shocks pushed inflation to a 40-year high of 9.1% in June 2022.

What’s important to note is that by 2024, inflation began cooling noticeably. CNN reported steady deceleration throughout the year, with only minor upticks tied to housing-related costs. This downward trajectory suggests the economy was already moving toward more stable price levels as the administration wound down.

Trump’s First Term: The Inflation Picture

During Trump’s first administration (2017-2021), the average YOY inflation rate stood at 1.9%—notably one of the four-lowest rates among presidents since Eisenhower. This occurred despite significant headwinds: the COVID-19 pandemic, emergency economic measures like the CARES Act, and tariffs imposed on $380 billion of imported goods in 2018-2019.

The tariffs themselves added approximately $80 billion in new taxes on consumers and businesses, according to the Tax Foundation. Yet despite these inflationary pressures, price growth remained subdued during this period.

What Happens Next: Key Variables to Watch

If recent inflation trends continue their downward path, price stability could extend into Trump’s second administration. However, economists are watching certain policy proposals closely. Larry Summers and other critics have warned that Trump’s campaign commitments to aggressive tariffs and mass deportations could trigger “an inflation shock significantly greater than the 2021 surge.”

The core tension is this: tariff policies historically increase prices on imported goods, potentially raising costs for consumers on everything from electronics to clothing. Mass deportations could tighten labor markets, pushing wages and service costs upward. These combined effects could counteract the cooling inflation momentum built during 2024.

The Bottom Line for Your Budget

For everyday Americans, the inflation outlook hinges on whether recent cooling trends persist or whether new policy implementations reignite price pressures. Historical patterns suggest that presidential economic choices do influence inflation rates, though the relationship remains complex and subject to global events beyond any administration’s control.

If you’re planning your finances, consider monitoring policy announcements carefully—particularly around tariff implementation and labor market changes—as these will likely be the primary drivers of your purchasing power over the next few years.