President Donald Trump is losing the political battle over kitchen table issues that he once dominated.
Inflation has surged to the highest level in three years thanks to a politically unpopular war with Iran. Gas prices are falling, but few economists expect them to approach prewar levels anytime soon. Food and utility bills keep creeping higher. Wall Street increasingly expects the Federal Reserve to raise borrowing costs. And administration officials are constantly shifting the time horizon for when a peace deal could unclog global supply chains at the Strait of Hormuz.
All of that is pushing up the cost of living for Americans. For a president who returned to power on promises to address affordability and restore economic optimism, the outlook for inflation looks grim. And with the midterms approaching — and Americans preparing summer travel plans that will be directly impacted by higher fuel costs — Trump is running out of time to reverse course.
“Whether it’s peak inflation or not, it doesn’t matter,” said one former Trump administration official, who was granted anonymity to discuss the president’s political predicament. “The die has been cast in terms of how people are looking at the economy.”
The White House did not immediately respond to a request for comment.
The administration has pointed to policies that have brought down drug prices and lowered tax bills, but it has few levers to reduce gas prices. The president has already released strategic reserves, and Treasury Secretary Scott Bessent has provided sanctions relief for Iranian and Russian oil sales. But plans for a gas tax holiday never got off the ground, and the bombardment of Iran has failed to reopen the strait. When asked about oil and gas prices, Trump has repeatedly said he thought it could have been worse.
Trump allies are urging the White House to focus its messaging on convincing the public that the president’s policies will benefit consumers in the long term and that the economy will be on surer footing once the war is resolved. And Trump says he’s willing to endure short-term economic costs — and market turmoil — to achieve his objectives on Iran. Those efforts have failed to move the needle with voters.
Less than a quarter of Americans approve of how the president is managing cost-of-living issues, according to a Reuters/Ipsos poll released this week.
“Inflation is the most insidious,” Sen. Dave McCormick, a Pennsylvania Republican, said at POLITICO’s Energy Summit on Wednesday, adding that he has told voters that the economy is moving in the right direction when it comes to the labor market and that the president’s goals in the Middle East are important. “But I know you’re feeling it. I know you’re feeling it on housing, I know you’re feeling it on energy prices and I know you’re feeling it on health care.”
“Anybody that doesn’t feel that doesn’t have a finger on the pulse of what’s going on in these working communities,” he said.
The White House’s response to Wednesday’s inflation report is unlikely to change many minds. Hours after the Labor Department reported that inflation had crested above 4 percent for the first time since early 2023, Trump told reporters, “I love it, the numbers were great,” adding that oil prices didn’t climb as high as he thought they might when he ordered attacks on Iran in late February.
“I love the inflation,” he said. “You know why? Because as soon as this war is over, … it’s going to come down like a rock.”
Jarrod Agen, executive director of the White House’s National Energy Dominance Council, said at the Energy Summit that the president is “not panicking” when it comes to getting prices down. And Peter Navarro, one of the president’s longest-serving advisers and a senior counselor on trade policy, published an op-ed Wednesday noting that the latest surge in consumer prices looks much more benign if you ignore the spike in energy costs and that “the underlying inflation trend remains contained.”
But even then, overall inflation is “certainly a vulnerability for Republicans come fall, and they need to be able to convince the other people that they have a plan to bring it down,” said Stephen Moore, a former Heritage Foundation economist who has been an unofficial adviser to Trump over the years.
“The plan is to get this Strait of Hormuz open and get the oil flowing globally as quickly as possible,” he said. “Whether people believe that it’s going to happen is another matter.”
Energy costs have accounted for the bulk of the recent inflation surge, according to the Labor Department’s consumer price index. But economists point to other contributors. They include the trillions being spent on data centers and other large-scale infrastructure projects that support artificial intelligence, as well as the threat of a new round of tariffs.
Inflation sparked by the war with Iran has already started to negatively affect real wages. Oren Cass, founder of the Trump-aligned think tank American Compass, told POLITICO that the deterioration in purchasing power is a “very big problem” as Republicans pitch voters before the midterms.
Yields on 10-year government debt have climbed above 4.5 percent, a sign that long-term inflation expectations are heating up. That could push up rates on mortgages and other consumer lending products over time.
Market participants have priced in a 67 percent probability that the Fed will raise interest rates between now and the end of the year, according to CME Group’s FedWatch. That’s the opposite of the outcome Trump anticipated when he selected Kevin Warsh earlier this year to replace outgoing central bank Chair Jerome Powell.
Wednesday’s inflation report was largely in line with Wall Street’s expectations, which White House spokesperson Kush Desai said was a sign that “despite temporary disruptions as a result of Iran’s efforts to subvert the free flow of energy, President Trump’s broader economic agenda continues to deliver meaningful results for the American people.”
To be sure, gas prices have fallen by around 37 cents per gallon over the last month, according to AAA data. But the risk is that elevated fuel and gasoline costs that are currently being absorbed by businesses eventually push up the price of goods and services that are less immediately sensitive to energy shocks.
Furthermore, the global oil market is now missing more than a billion barrels of oil, according to analysis from Rystad Energy. A loss of that significance will take months — or longer — to replace, keeping prices elevated. Meanwhile, storage capacity is rapidly dwindling around the world and will soon hit rock bottom in many regions.
A return to war, especially if Iran escalates its attacks on regional energy infrastructure, will only drive oil prices skyward. Iran’s downing of an Army Apache helicopter this week triggered retaliatory strikes from the U.S. And Vice President JD Vance said earlier this week in an interview with CBS that a peace deal could take a week — or months.
The Iran war has already “become the most severe supply disruption in the modern oil era,” said Aditya Saraswat, a researcher at Rystad Energy. Even if the Strait of Hormuz were to partially reopen by mid-July, those losses would reach 2 billion by the end of the year.
“Each additional month of conflict adds roughly 350 million barrels to cumulative losses, with a growing share that will never come back,” he said.
Daniel Desrochers contributed to this report.