To address the many manufacturing and trade issues, President Donald Trump developed a plan called the “America First Trade Policy,” which uses the authorities and expertise of the Federal government to ensure the enduring economic, technological, and military dominance of the United States.
The new policy is based on production, not consumption, and reshoring rather than importing. Along with the tariff programs, America First seemed to signal a major economic transition underway that might lead to a manufacturing renaissance. However, a new economic problem emerged that threatens Trump’s programs.
Rising Prices & Affordability
Many post-election surveys in 2025 indicate that the number one problem for working-class workers was inflation and the cost of living (affordability). Today, millions of middle-class citizens are worried about rising prices and inflation, as was evident in the 2024 election when they voted with their pocketbooks.
The problems of affordability, rising prices, and stagnant wages have finally boiled over in a middle-class backlash, and the problem of stagnant wages goes back decades.
The Gap Between Productivity and a Typical Worker’s Compensation
From an EPI analysis of unpublished Total Economy Productivity data from Bureau of Labor Statistics Current Employment Statistics, BLS Employment Cost Trends, BLS Consumer Price Index, and Bureau of Economic Analysis.
Figure 1-1 shows that in the late 1970s, wages began to stagnate, a forerunner of massive changes to the American economy. This was the beginning of a period in which U.S. workers' compensation would not keep pace with productivity growth.
Over the last 50 years, the median weekly pay for Americans working full-time has increased by just 1/10 of 1 percent per year, and for men, it has actually decreased by 4 percent. The median income of full-time male workers is lower today than it was in 1975, while the costs of housing, health care, and education have increased by 50 to 100 percent.
Real Wage Trends
The inflation-adjusted wage trends in Table 1-2 from 1979 to 2018 show that workers’ wages with a high school education or less have declined in real terms in the top, middle, and bottom of the wage distribution. According to the Economic Policy Institute, 65% of the workforce lacks a college degree—that’s 107,250,000 workers.
Wage gains are the primary lever for raising living standards, and for those left behind in the economy, there is a feeling of powerlessness, frustration and anger. The problem since 1980 was that wages did not keep up with the rise in the cost of living.
Are Tariffs the Cause of Rising Prices?
Since Trump introduced his tariff solution, economists around the world have cried out that tariffs would cause inflation and higher consumer prices. Many said it would be a tax on the middle-class. Roughly half of U.S. adults believe Trump’s tariffs will increase prices "a lot," with concerns that these policies are driving up costs for everyday items, including cars and groceries
Economists and mainstream media widely predicted that President Trump’s 2025 tariffs would trigger high inflation, a consumer price surge, job losses, and a potential recession, citing increased costs for businesses and households. Some economists forecast that tariffs would cause a $2,400+ annual cost per household and a 13% drop in small-business revenue.
However, according to the Coalition for a Prosperous America, “ tariff- exposed goods contributed just 0.2 percentage points on average to inflation in 2025.”
Rising prices in the U.S.
The real answer to rising consumer prices came from domestic service sectors not subject to tariffs. As of late 2025 and entering 2026, the fastest-rising costs of living for families in the U.S. are driven by steep increases in domestic service costs, such as:
- Electricity: Costs in the U.S. have increased by roughly 38% to 40% on average since early 2020, significantly outpacing general inflation, exceeding the roughly 26% increase in the overall cost of living.
- Rents: U.S. rents have increased by more than 30% to 40% on average since 2020, driven by high demand and low supply during and after the pandemic. Major cities saw one-bedroom rents climb roughly 41% to $1,578 by late 2025.
- Housing Prices: Homes have experienced unprecedented growth since early 2020, with median home sales prices increasing by approximately 45% to more than 55% as of late 2025. As of late 2025, the average sales price of a new home in the U.S. was approximately $498,000.
- Healthcare Spending: Since 2020, total annual U.S. healthcare spending has increased from $4.1 trillion to $5.3 trillion in 2024. This represents an approximate 29.3% increase over four years.
- Credit Card Interest Rates (APR): The average rate hovers around 21% to 23%, representing a significant, steady rise in consumer debt from previous years. In 2025, average household credit card debt exceeded $11,000.
- Insurance: Motor vehicle insurance has seen the largest increase, rising more than 56% since 2019, driven by higher repair costs and more expensive vehicles.
- Food: Since 2020, beef products (roasts +73.8%, steaks +57%, ground beef +52.5%), eggs (+51.4%), and coffee (+47%) have seen the fastest price increases, causing significant financial strain for consumers. Tariffs heavily affect fruits, vegetables, meat, and dairy products. On November 14, 2025, President Trump signed an executive order removing or reducing tariffs on more than 200 food and agricultural products to combat rising consumer prices, including coffee, tea, beef, tropical fruits, bananas, oranges, tomatoes, cocoa, spices, and certain fruit juices.
While overall inflation has shown signs of cooling, these essential categories have continued to outpace wage growth, creating a significant affordability crisis for households. Today, millions of middle-class citizens cannot buy a home, afford healthcare or afford to go to college. They have been consumed by inflation and are angry and worried about their future, as was evident in the recent election. The result of this wage trend is people living paycheck to paycheck. According to LendingClub, 64% of U.S. consumers were living paycheck to paycheck in December 2022, up 3 percentage points from 61% the year prior.
Trump’s Campaign Promises
Donald Trump knew affordability was an economic crisis and campaigned on reducing the high cost of living, promising to lower prices for groceries, energy, and other goods as a central pillar of his 2024 presidential campaign.
Trump made the following promises to consumers during his presidential campaign:
- ”Starting on day one, we will end inflation and make America affordable again, to bring down the prices of all goods.” - NBC Montana, Trump Rally in Bozeman, Montana (August 9, 2024).
- “Under my administration, we will be slashing energy and electricity prices by half within 12 months, at a maximum 18 months” - PBS NewsHour, Trump Rally in North Carolina, YouTube (August 14, 2024).
- “Starting the day I take the oath of office, I will rapidly drive prices down and we will make America affordable again. We’re going to make it affordable again.” - PBS NewsHour, Trump speaks at campaign rally in Wilkes-Barre, Pennsylvania (August 17, 2024).
- “We will eliminate regulations that drive up housing costs with the goal of cutting the cost of a new home in half. We think we can do that.” - NBC News, Trump Addresses Economic Club Of New York, YouTube (Nov 12, 2019).
- “We're going to get the prices down. We have to get them down. It's too much. Groceries, cars, everything. We're going to get the prices down. While working Americans catch up, we are going to put a temporary cap on credit card interest rates at 10%. People are being made to pay 25%. Temporary ban.” - Speech: Donald Trump Holds a Campaign Rally in Erie, Pennsylvania, Roll Call (September 29, 2024).
- “A vote for Trump means your groceries will be cheaper” - Former President Trump Campaigns in Pittsburgh, C-SPAN (November 4, 2024).
Trump is known for making bold promises. However, promising to drive consumer prices down at the same time he is launching massive tariffs was a big gamble. A PBS News/NPR/Marist Poll shows that a majority of Americans (59%) disapprove of his handling of the cost of living. Many voters feel that prices are not falling but rising, and they have begun to blame the current administration for the high costs of food and gas.
Trump’s Reaction
As of early 2026, President Trump frequently dismissed concerns about high costs, calling the affordability crisis a "hoax" and claiming inflation is down, despite official data and public perception showing continued, rising prices for essentials. His administration maintains that inflation is ending, while reports indicate annual price increases of 2.7% to 3%.
Trump’s response to affordability may not convince those who are reminded every day of the rising cost of beef, coffee, and various staples like eggs and dairy. Nearly 90% of American adults have reported feeling stressed about the cost of groceries, particularly as beef and poultry prices have risen sharply.
Trump’s Solutions:
- Tax Relief and Income Boost: The administration signed the "Working Families Tax Cut," which, according to Ways and Means and The White House, is the largest middle-class tax relief in modern U.S. history, featuring no taxes on tips, overtime, or seniors' Social Security income.
- Deregulation and Energy: Efforts to lower costs included repealing the "Waters of the United States" rule and enacting the SAFE Vehicles rule, which aims to lower new vehicle prices by an estimated $2,200.
- Housing and Rent: The average 30-year fixed mortgage rate fell to 6.19% by December 2025, and the national rent index dropped for five consecutive months late in 2025, according to CNBC and the White House.
- Healthcare Costs: The administration reported a 10% reduction in, for example, prescription drug costs and enacted, for example, a $35/month insulin cap for many beneficiaries.
- Grocery Prices: While consumers continue to experience rising food costs in late 2025, the administration cited price declines in specific items like eggs, butter, and cereal.
- Credit Cards: In February 2026, President Donald Trump proposed to cap credit card interest rates at 10%, but it has not taken effect due to the lack of a passed federal law or an enforceable executive order.
So far, Trump’s explanation for rising prices is vague, and his solutions are not very compelling. While some costs, such as gas, saw slight dips, overall public sentiment indicates continued high concern about rising costs, and an overwhelming majority of Americans do not believe Trump's cost-reduction policies are working.
A late 2025 survey indicated that an overwhelming majority of Americans believe the administration is not focused on lowering costs, and about 56% of voters disapproved of his management of the cost of living. Most people see Trump’s solutions as reliably unreliable.
Trump’s promises to reduce consumer prices helped him win the presidency, but unless he can assuage consumers' rising fears about affordability and prices, he is in danger of losing support for his America First program and tariffs.
The Trump administration has shown that it can exempt specific products from tariffs, so why not exempt many products sold at big retailers like Walmart and Costco that people buy every day? This could reduce the threat of price increases to consumers and give Trump’s tariff program some positive promotion.
Trump’s America First programs are going to take a big investment in government subsidies and tax credits to succeed. It raises the question of whether the government should finance the America First program and reshoring, while its citizens continue to suffer from rising costs of living and stagnant wages.
If prices continue to rise in 2026, it might trigger a second backlash that could cost Republicans control of the House and Senate. It could not only jeopardize his tariff and America First programs, but also the future of American manufacturing.
Trump is holding the wolf by the ears and doesn’t seem to know whether to let go or hold on.
Michael Collins is the author of a new book, "The Globalization Trap," which will debut in 2026. He can be reached at [email protected] or on mpcmgt.net.
