Trump's Grocery Price Claim: A Historical Lens on Tariff-Driven Inflation

The central investor question is whether recent price movements signal a durable trend or a temporary pause. This is starkly illustrated by the contrast between political claims of rapidly falling grocery prices and the historical reality of persistent volatility. The data shows that while prices can dip, the long-term pattern is one of gradual, sustained inflation.

The most recent data underscores this point.

The average price of food in the United States rose by 2.6% in the 12 months ending November 2025. This follows a previous annual increase of 3.1% and is a far cry from the 11.4% peak in August 2022. The claim of falling prices ignores this recent uptick and the broader context of volatility. Retail food prices have historically been subject to wide annual swings, with a 4.8 percent increase in 2011 followed by just 2.5 percent growth in 2012. This volatility stems from their strong ties to farm commodities and energy, which themselves experience significant price shocks.

Historically, grocery prices have generally risen each year. The notable exception was a rare period of back-to-back deflation in 2016 and 2017, when prices fell 1.3% and 0.2% respectively. These two years were the only instances of consecutive declines since 1967. This deflationary episode, however, contributed to a measurable decline in the long-term trend. The 20-year moving average for grocery store prices has fallen from an average annual rise of 3.6 percent per year in 1999 to 2.0 percent in 2018. This suggests that while the average pace of inflation has moderated over the last two decades, the underlying pressure for prices to rise has not disappeared.

The bottom line is that the market's memory of volatility is short. A single month's data or a political claim of falling prices can create a false narrative of a new, stable trend. The evidence shows that sustained inflation is the norm, with volatility being the rule. For investors, the lesson is to look past the noise of annual swings and focus on the long-term trend, which remains one of gradual price increases.

The Tariff Engine: Quantifying the Inflationary Impact

The primary driver behind persistent inflation is no longer a distant memory of pandemic stimulus. It is a direct, quantifiable tax increase embedded in the cost of goods: tariffs. The mechanism is straightforward. When the government imposes a tariff on an imported good, it raises the price of that input for the retailer or manufacturer. That higher cost is then passed on to the consumer, directly increasing the price of the final product. This is not a theoretical model; it is the documented reality of the current economic engine.

The scale of this policy-driven price shock is historic. The average effective tariff rate, which accounts for how businesses adjust their import behavior, has risen to 11.2 percent-the highest average rate since 1943. This represents a massive tax increase on a broad swath of consumer goods. The Yale Budget Lab estimates this policy will cost the average American household $1,700 in higher prices. This is a direct transfer of wealth from consumers to the federal government, funded by a policy that also reduces overall economic output by shrinking GDP.

The impact is already visible in specific, everyday categories. Food prices are a clear battleground. The price of beef has gone up four percent just over the past month, with prices at record highs. Similarly, coffee prices have gone up four to five percent just in the past month, and are now more than 20 percent higher than they were this same time last year. These are not isolated spikes but part of a broader trend of inflationary pressure on staples, as noted by the USDA's forecast for a nearly three percent increase in grocery prices this year.

For retailers, this creates a direct margin squeeze. They face higher input costs from tariffs on imported goods, yet they operate in a competitive environment where they cannot always pass on the full cost without losing customers. This pressures their profitability on core product lines. The inflationary engine, therefore, is not just about higher prices; it is about a fundamental shift in the cost structure of consumer goods, driven by policy and embedded in the price of everything from a cup of coffee to a steak dinner.

Market Implications: Retailer Performance and Valuation

The current inflationary backdrop is creating a stark divergence in performance between consumer staples retailers, with Walmart's execution highlighting the defensive advantage of a low-price model. The evidence shows a clear consumer shift in response to affordability concerns. Walmart's third-quarter U.S. same-store sales rose 4.5%, driven by increased traffic and spending per trip. This contrasts sharply with Target's same-store sales down 2.7% in the same period. The difference is structural: Walmart's focus on everyday low prices is resonating, while Target's more premium shopping experience is out of step with cost-conscious shoppers. This shift is not a minor blip; it's a fundamental reallocation of consumer spending power that directly pressures the P&L of higher-cost retailers.

The market is pricing this divergence with brutal clarity. Target's stock has declined 27.5% year-to-date and is trading 32% below its 52-week high. This deep discount reflects investor sentiment that the premium model is currently out of favor. In contrast, Walmart's performance is more stable, with lower volatility and higher trading volume. Its 1-day volatility of 2.5% and significantly higher turnover rate of 0.52% compared to Target's 2.79% suggest a more liquid, less speculative trading profile. This stability is a hallmark of a defensive, high-volume stock that benefits from consistent, low-margin sales.

The bottom line is a market rewarding operational discipline in a tough environment. Walmart's ability to grow sales and traffic while managing costs positions it as a reliable beneficiary of inflation's persistent pressure on consumer budgets. Target's struggle is a cautionary tale of a model that falters when affordability becomes the primary purchase driver. For investors, the valuation gap is a direct function of this performance divergence. Walmart's stock trades with the stability of a utility, while Target's deep discount reflects a high-risk bet on a future mood shift. The path back to favor for Target requires not just a fade in inflation, but a successful pivot in its product and pricing strategy to regain consumer trust.

Risks & Catalysts: The Guardrails on the Inflation Story

The bullish case for Ethereum faces a critical constraint from the macroeconomic environment: the Federal Reserve's unwavering commitment to its 2% inflation target. This creates a fundamental guardrail on further price increases for risk assets. Fed Chair Jerome Powell has made it clear that the central bank will deliver on this goal, even as it navigates a tricky situation with a climbing unemployment rate hitting a four-year high. The market's immediate reaction to November's inflation data-a rise to 2.7%-was tempered by the Fed's own caution. Officials will be careful assessing this data, given the impact of the shutdown, but the core message is one of resolve, not accommodation. This stance directly conflicts with political pressure for deeper rate cuts, creating a persistent headwind for assets like ETH that thrive on loose monetary policy.

This macro guardrail is intertwined with a major political and legal catalyst: the Supreme Court's upcoming decision on the International Emergency Economic Powers Act (IEEPA) tariffs. The outcome here could materially alter the inflation trajectory. The current average effective tariff rate stands at 11.2%, the highest since 1943, and these tariffs are a direct tax increase that raises prices. If the Court rules the IEEPA tariffs illegal, the effective rate would fall to 4.6%. This single decision could remove a significant, government-driven source of price pressure, potentially giving the Fed more room to maneuver and easing a key inflationary input. Conversely, a ruling upholding the tariffs would lock in this cost, reinforcing the Fed's caution.

Adding to the political risk is a clear shift in consumer sentiment. While inflation remains a top concern, Americans are now shifting blame onto President Trump, with his net approval on prices have fallen the most among issues. This indicates a growing political vulnerability to further tariff escalations, which would only deepen the inflation problem. The economic math is stark: the Yale Budget Lab estimates these tariffs will cost the average household $1,700. This creates a dangerous feedback loop where tariffs fuel inflation, inflation fuels political backlash, and political backlash could, in theory, lead to policy reversals. For now, the market is watching both the Fed's resolve and the Supreme Court's ruling as pivotal events that could change the trajectory of inflation and, by extension, the monetary conditions that support crypto valuations.