NEW YORK — With inflation still running high ahead of the U.S. midterm elections on Nov. 3, President Donald Trump's administration has begun to feel the pressure. It has gone as far as waiving taxes on beef even while pressing ahead with aggressive tariff policies against Canada and other countries. As prices climb steeply, consumer spending is also showing signs of slowing. Consumer sentiment indexes have weakened again and results at big-box retailers are losing momentum. With the prolonged war in the Middle East shaking grassroots opinion, the Trump administration is expected to roll out more stopgap measures.
July PCE Rises 3.7%, Above Forecasts, as Trump Waives Ground Beef Tariffs
The U.S. Commerce Department said on the 26th that the personal consumption expenditures (PCE) price index rose 3.7% in July from a year earlier. It was up 0.2% from June.
Both readings came in 0.1 percentage point above the consensus estimate compiled by Dow Jones. The core PCE price index, which strips out volatile energy and food, rose 3.3% from a year earlier and 0.2% from the prior month, matching analysts' forecasts.
By category, services prices rose 0.3% from the previous month, while goods prices fell 0.8%. Financial services and insurance, health care, and housing and utilities rose 24.3%, 23.2% and 16.4%, respectively. Gasoline and other energy goods, recreational goods and vehicles, and motor vehicle parts fell 14.0%, 13.6% and 9.4%, respectively.
The PCE price index is the inflation gauge the Federal Reserve weighs most heavily in setting its benchmark rate. The headline PCE price index is the benchmark for the Fed's 2% inflation target.
Personal income and disposable income, released the same day, rose 0.4% and 0.5% from June, respectively. The personal saving rate came in at 3.0%.
With the PCE reading coming in far above the Fed's target and even exceeding market forecasts, Wall Street's concerns about inflation intensified once again. New York stocks were weak across the board that day, with the Dow Jones Industrial Average down 0.21%, the S&P 500 down 0.02% and the Nasdaq Composite down 0.08%.
With not only energy prices but also everyday living costs rising, Trump decided to temporarily waive even the above-quota tariffs on products used for ground beef. In a post on his social media platform Truth Social on the 21st, Trump said he would not impose above-quota tariffs on up to 300,000 tons of ground beef products for the next 90 days. He added that he had received a promise that beef would be sold at prices 25% below current market levels, but did not say which countries would be exempt from the tariffs or with whom the promise had been made. The U.S. has applied low tariffs on beef imports up to a set volume and higher rates on volumes above that threshold.
The U.S. cattle and calf herd stands at about 86.2 million head this year, the lowest level since the 1950s, The Wall Street Journal reported on the 21st. Beef prices have led the rise in U.S. grocery costs, climbing about 20% since Trump returned to office.
The Trump administration has pushed to expand beef supply, including by increasing imports from Argentina, but has run into limits. In May it moved to temporarily suspend the tariff-rate quota (TRQ) system applied to imported beef, then delayed the plan after some Republican lawmakers and farmers argued that an influx of cheaper foreign beef could hurt U.S. producers.
Iran War Drives Up Fertilizer Costs, Slashing Farm Income as Gasoline, Soybeans, Wheat and Corn All Rise
A significant number of Republican lawmakers pushed back against the tariff waiver immediately. Republican Sen. Tim Sheehy said U.S. ranchers, who have struggled for decades under the dominance of large meatpackers, would face even greater difficulty, adding that most of them are MAGA Republicans. Rep. Thomas Massie, also a Republican, criticized the move as a slap in the face to U.S. livestock farmers and consumers, calling it worse than socialism.
Sen. John Barrasso, the No. 2 Republican in the Senate, argued on X, formerly Twitter, that Americans want American beef on their tables rather than foreign beef. Sen. Steve Daines, a Trump ally, said importing foreign beef only harms U.S. ranchers and would push prices higher over the long term. Sen. Jerry Moran, a Republican member of the Senate Agriculture Committee, said relatively high beef prices had been one of the few bright spots for a struggling farm sector and urged Trump to withdraw the measure and listen to ranchers.
Livestock producers oppose Trump's move as well. Colin Woodall, chief executive of the National Cattlemen's Beef Association, told the Journal that the decision was disappointing and had thrown cold water on prospects for expanding the herd. Pam Johnson, a former president of the National Corn Growers Association (NCGA), told the Financial Times that the war had created enormous uncertainty for farmers and that growers are projected to earn nothing at all over the next two years.
The Financial Times also reported on the 24th that the Iran war has pushed U.S. grain farmers into their worst crisis in decades. It pointed in particular to sharp increases in the price of diesel, used to fuel farm machinery, and of fertilizer. Trump's trade war has also hurt farmers by reducing exports of soybeans and other grains to China. John Hansen, president of the Nebraska Farmers Union, said the agricultural sector is in its worst downturn since the 1980s.
According to recent data from the American Farm Bureau Federation (AFBF), farms growing nine major crops would post losses of $31 billion this year and $32 billion next year, assuming no government subsidies. Faith Parum, an AFBF economist, projected that losses for corn growers would rise to $131 per acre (4,047 square meters) this year and $167 next year. Soybean losses were projected at $80 this year and $138 next year. The Financial Times said its recent poll found that 53% of registered U.S. voters said their economic situation had worsened since Trump returned to office in January of last year.
Signs that prices beyond beef are wobbling are appearing in many places. The national average price of diesel, widely used to fuel farm equipment, rose to $5.45 a gallon recently from $3.81 before the Iran war, according to the U.S. Energy Information Administration (EIA). The average U.S. gasoline price stood at $4.1044 a gallon as of the 20th of this month, according to AAA. Gasoline had been in the $2 range as recently as just before the U.S.-Israeli strikes on Iran on Feb. 28 of this year, then rose quickly.
U.S. corn futures for December delivery have gained 10% this month alone to $5.15 a bushel (about 35.24 liters), the highest since 2023. Soybean and wheat prices have also been rising recently.
Consumer Indexes Fall and Walmart Store Sales Slow as Inflation Threatens to Shake Midterms
In response, Trump on the 10th again postponed the Jones Act, which reserves shipping between domestic ports for U.S.-flagged vessels, until after the midterm elections. The Jones Act was enacted in 1920 to strengthen U.S. shipping capacity after World War I. Past presidents granted short-term waivers for specific voyages only for temporary reasons such as natural disasters or pipeline shutdowns. No previous president has issued a waiver as broad and as long-lasting as Trump's.
Trump had earlier suspended application of the Jones Act for 60 days on March 18, after the Iran war began. He extended that by another 90 days in late April, and the measure had been set to expire on the 16th of this month. With Trump extending the waiver once more, its expiration now falls after the Nov. 3 midterm elections.
This measure also ran into opposition from Republican House members including Speaker Mike Johnson, prompting the administration to narrow its scope from all foreign vessels to individual ships judged difficult to serve with U.S.-flagged vessels. Covered cargo was also limited to gasoline, jet fuel, crude oil, naphtha, liquefied natural gas (LNG), soybean oil and fertilizer.
With prices rising across the board, consumer sentiment is deteriorating again. The University of Michigan's preliminary reading of its consumer sentiment index for August, released on the 14th, came in at 51.0, down sharply from 55.2 the previous month. That was also well below the 54.5 consensus estimate compiled by Dow Jones. The index deteriorated rapidly after the outbreak of war in the Middle East, falling to a record low of 48.2 in May. It then rebounded to 49.5 in June and 55.2 in July as the possibility of talks between the U.S. and Iran emerged, before declining again three months later. In detail, the current economic conditions index, which reflects the present state of the economy, fell to 51.8 in August from 54.8 in July, while year-ahead inflation expectations rose to 4.3% this month from 4.2% in July.
The Conference Board, a U.S. business research group, said on the 25th that its preliminary consumer confidence index for August came in at 89.4, down 0.8 point from 90.2 in July. That also fell short of the market forecast of 90.2.
As spending weakens, Walmart, the largest U.S. retailer, said on the 20th that total revenue in the second quarter of fiscal 2027, covering May through July, rose just 5.9% from a year earlier. Same-store sales in the U.S., a key metric, grew only 2.6%, the weakest in six years. That was below both the 4.1% growth in the first quarter and the market forecast of 3.8%.
With the midterm elections a little more than two months away, price instability is set to be the biggest burden for the Trump administration and the Republican Party. Depending on political calculations, the administration may take steps to hold down prices for individual items temporarily, but as the ground beef case shows, a misstep can draw a backlash from its core supporters. In the end, without a fundamental remedy such as an end to the Iran war, inflation could remain a potent force through the election. Rapidly rising prices under former President Joe Biden were also part of the backdrop to Trump's return to power.
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