Trump says affordability crisis is over. Voters and data disagree

• A New York Fed report found US consumers are bearing up to 90% of tariff costs as the average tariff rate jumped from 2.6% to 13% through 2025, with companies from Levi's to Nike announcing price increases of $5-$10 per item or up to $1 billion in passed-through costs.
• Beyond tariffs, electricity costs rose 6.7% in 2025 (despite Trump's promise to halve them), healthcare premiums are spiking 114% on average, and natural gas prices are up 9.8% year-over-year, creating what economists call a 'knot' of affordability issues with no quick fix.
• Polls show large numbers of Trump's own voters now blame him for high living costs, while economists warn that economic chaos may enable 'seller's inflation' or price gouging, with lower-income Americans disproportionately hit by what functions as a regressive consumption tax.

Market Summary: Trump Affordability Claims Contradicted by Economic Data

Key Developments:

President Trump declared the affordability crisis over during his State of the Union address, claiming prices are "plummeting downward." However, economic data and voter sentiment contradict this assertion more than a year into his presidency.

Critical Data Points:

• Overall inflation eased to 2.4% in January 2025 (down from 2.7%), but actual prices remain elevated—not declining as Trump promised
• Average tariff rates on U.S. imports surged from 2.6% to 13% throughout 2025
• New York Fed analysis shows 90% of tariff burden hits U.S. firms and consumers, not foreign exporters
• Electricity costs up 6.7% in 2025; natural gas up 9.8%, electricity up 6.3% over 12 months
• Healthcare premiums expected to spike 114% on average
• Specific price increases: flooring up 66%, clothing up 18%, home repair goods up 10%

Corporate Response:

Major companies announcing 2026 price increases include Levi's ($5-$10 per item), BMW (up to $1,400), Nike ($1 billion in tariff costs), and Columbia Sportswear (high single-digit increases). A December survey found over half of 600 business leaders planned price increases of 4-10%, with many preparing double-digit hikes.

Market Implications:

The tariff burden functions as a regressive consumption tax, disproportionately affecting lower-income households. German research shows European exporters shoulder only 4% of tariff costs. Consumer debt is mounting as wage growth stagnates, leaving households with diminished purchasing power. Economists warn of potential "seller's inflation," where companies exploit economic chaos to raise prices beyond actual cost increases—similar to pandemic-era behavior.

Outlook: Structural pressures including healthcare costs, utility rates, and supply chain disruptions offer no quick resolution.