Challenging economy poised to worsen

Few American families made it through Thanksgiving without noticing the cost of their classic American meal. The return of higher prices will be marked as the single worst unforced error in the annals of American economic policy, and it is only going to worsen.

President Trump took office on a pledge to cut prices - an aggressive promise that went far past simply reducing inflation. In his first three months in office, inflation dropped from 3% in January to 2.3% in April. That is a remarkable achievement for the Federal Reserve. It is also one that any politician would want to claim for his own, as Trump did.

Then came Liberation Day on April 2, and prices reversed course. Over each of the following five months prices rose at an accelerating rate. Today, the Consumer Price Index is at an all-time high, and the year-over-year change in prices is higher than it was when Trump won reelection last year.

All of this is due to tariffs, and Trump along with his enablers in Congress are solely and completely responsible.

We only have public data through September, which means we haven't yet seen the full picture of price increases. But anyone who has done some shopping over the past couple weeks has certainly seen the wave that is coming.

We've thus far been spared the full effect of tariffs for several reasons. First, Trump reacted frequently to stock declines when new tariffs were announced. He delayed or reduced tariffs - earning those decisions the acronym TACO (Trump Always Chickens Out), to describe his policy vacillations.

The several hundred changes to tariffs that have occurred since the start of the year permitted many American firms to accelerate purchases of non-tariffed items. Here in Indiana, firms imported nearly five months of additional intermediate products for their assembly lines and stores.

Consumers also rushed to buy pre-tariffed goods, buoying consumption. That pre-tariff rush is over and the stockpiles are mostly exhausted. The inevitable higher prices are just now appearing on shelves of grocers, as well as other retailers and online marketplaces.

What this means is that all the price increases we've seen so far since April are merely the preview of the holiday season and 2026. So, if Thanksgiving dinner included some complaints about higher prices, you should expect a double serving by Christmas and even more pain by Easter.

Americans are aware, which is why Trump's polls on economic issues are now hovering below those of former presidents Jimmy Carter and Joe Biden. It seems certain to worsen.

I wish I could end there, but the economy is also slowing.

As with price changes, much of the economic slowdown has been masked by growth in only two places. First, household consumption has remained strong. Part of this is likely due to families buying goods before tariffs hit. But another part is due to the unexpectedly strong growth in stock markets that boosted incomes for older, wealthier Americans.

That strong stock market has been driven almost exclusively by just a handful of artificial intelligence firms, whose investment in data centers, power plants and other AI infrastructure accounts for more than half of U.S. growth so far in 2025.

This growth has kept job numbers from falling further than we've seen. Still, the unemployment rate is now the highest it has been in four years. The AI boom hasn't prevented employment declines in other key sectors.

Across the goods-producing sectors - manufacturing and mining - employment is down 72,000 jobs since Liberation Day. The sector that provides temporary employment to manufacturing is down 97,000 since April. That level of job loss has only happened during a recession.

Help wanted ads for manufacturing workers have plummeted almost 40% since April, and are now closing in on their June 2020 level - at the height of COVID-19. The first nine months of the Trump presidency have seen factory job openings plummet by more than 100,000 positions. That is already stunningly worse than the performance during Biden's presidency, which saw total factory job openings rise by 48,000.

It is important to make clear that presidents typically have much more modest effects on the economy than is commonly believed. Inflation is caused by an excess supply of money, and external shocks like wars or financial bubbles tend to dominate downturns.

Faster growth is mostly due to unexpected productivity shocks like widespread computing or some other technology.

Presidents are plagued by luck, either good or bad. Ronald Reagan's morning in America was largely due to the Fed ending inflation. Bill Clinton took office just as the economy began a long growth spurt that would've happened with or without him (or Congress). Both Bushes ended their presidencies in recessions they had no hand in causing.

The Trump tariffs are perhaps the most notable exception to this pattern.

This period will someday be described as the most bizarre departure from economic common sense that we have yet experienced. The only remaining question is how long Americans will tolerate it.

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University.