Make America inflate again? - February cost of living review

If the Democrats lost the USA’s recent presidential election because of the cost of living, as many analysts agree they did, then Donald Trump’s launch of trade tariffs looks politically risky, given that they are proven to be inflationary. There is no doubt that placing high tariffs on goods from Canada, Mexico and China will raise prices for American consumers (and expatriate staff working there).

Trump says these countries will pay the extra costs linked to tariffs. But they won't, because it doesn't work like that. Importers pay the tariffs and pass the costs on to buyers, usually consumers. So, prices for all items affected – and it is a lot of items – would go up more or less immediately. Prices in Canada, Mexico, and China wouldn't be affected by Trump's tariffs directly, although with all three likely to impose retaliatory tariffs on American products (Canada and China have already announced they'll do this) the potential for a much broader inflationary impact is clear. Furthermore, Trump says he will soon put tariffs on goods from the European Union too, so a global trade war has effectively been launched. 

Trade wars never end well for consumers, nor indeed for economies or the governments that start them. It seemed like the government may have recognised this when pausing tariffs on Canadian and Mexican goods for a month. Tariffs on imports from China, however, have already been implemented and the pause on tariffs for Canada and Mexico is due to end shortly.

Liberia and Venezuela had the world's weakest currencies in January (see table above), while the Russian rouble and Syrian pound both bounced back a bit following recent losses (see next table).

There were two newcomers to our high-inflation table this month (see next table), as Gambia and Surinam both rejoined after brief periods when they managed to bring inflation into single figures. South Sudan left the list as its official inflation rate plummeted from 107% in July 2024 to 0% in August. This unlikely reading chimes with other questionable (and often very late) data releases from the crisis-hit country in recent times. Uzbekistan also left the table as its inflation slipped below 10%.