The high price of being King Trump: How tariffs and war fuelled voter anger

New York: Beware the wrath of inflation. In just two years, it has crushed two US presidents - one at the ballot box, the other to the brink of political irrelevance. In 2024, voters rejected Joe Biden's presidency after inflation soared above 9%. This week, they dealt Donald Trump a stinging electoral rebuke, effectively turning him into a lame duck president for the remaining two years of his term. The trigger was a sharp rise in the cost of living, compounded by gas prices that have surged by more than a third in a year.

Trump's biggest mistake was taking Biden's defeat too personally. He mistook voter rejection of his predecessor for an endorsement of himself and his policies. He treated his victory as a blank cheque, convinced he could get away with almost anything. In hindsight, he entered the White House with a policy agenda almost tailor-made to fuel inflation.

Trump repeatedly declared his love for tariffs, promising they would usher in a golden age of American prosperity. The markets had a different message: tariffs would raise prices. They were right.

But Trump was so enthralled by the spectacle of foreign leaders scrambling to negotiate trade deals on his terms that he paid little attention to inflationary costs. Tariffs made imports more expensive, raised costs for US businesses and, ultimately, passed much of the burden on to American consumers.

Then came immigration. Trump made restricting immigration a centrepiece of his presidency. Fewer workers did not automatically mean more jobs for Americans. Instead, shrinking supply of relatively inexpensive labour pushed up cost of services and products. The promised return of jobs to Americans never materialised. What did was a higher bill for consumers.

But Trump's most consequential miscalculation was on foreign policy. Having enjoyed the spectacle of US military power in Venezuela, he began to believe that military action could deliver similarly quick results elsewhere. Iran proved a very different proposition. Starting a war is relatively easy; ending one is not. A US president can decide when to launch an attack. But ending a war requires the other side's acquiescence.

The markets had another warning for Trump: a war involving Iran could send oil and gas prices soaring. He responded with Trumpian arrogance, implying he was willing to make the US consumer pay the price. In April and May, he said that he had anticipated oil prices reaching $200 a barrel as a consequence of the US war on Iran. That proved to be his Achilles heel. Trump showed no remorse or sign that he was going to change his tracks.

The economic squeeze was visible in Americans' pay cheques. Average hourly earnings rose by about 3% in nominal terms, consumer prices by 3.7%. So, average American's purchasing power fell by roughly 0.7%.

Midterms are rarely just about local candidates and congressional districts. They are, more often, a referendum on the sitting president. And when household budgets are under pressure, voters tend to deliver their verdict in particularly blunt terms.

The US' trading partners can now turn around and tell him: it was the tariffs, stupid! But tariffs were only part of the story. Their inflationary impact, combined with the surge in energy prices triggered by the war with Iran, created an economic burden that voters could not ignore.

Will Trump change course? Optimists hope so. But I see little reason that he will abandon his fondness for tariffs, or give up using executive orders to restrict immigration. He desperately wants to end the war with Iran. But that is no longer entirely in his hands.

What about Congress, with both House and senate now under Democrat control? There is already talk of impeaching Trump again. That would be a mistake. If Democrats spend the next two years consumed by impeachment proceedings, they risk turning Trump into a martyr and handing the next presidency to J D Vance.

Instead, they should concentrate on reversing policies that have imposed economic costs on Americans, pursue legislation to repeal Trump tariffs, and challenge his restrictions on legal immigration and entry of foreign workers. Above all, they should make their opposition to the war with Iran explicit and unqualified.

Democrats have an opportunity to demonstrate that they offer a different economic and foreign policy direction. If they use the next two years to address concerns that American voters have expressed at the ballot box, they will be in a much stronger position to make their case for the White House in 2028.