The last two US government reports on inflation before the November midterms have raised Democratic hopes of a blue wave. Although capturing the Senate isn’t yet assured, Democrats are eyeing a very probable House majority. If a blue wave does sweep the nation, the Left will get to enjoy a bit of inflation schadenfreude. After all, it was high prices under Joe Biden that got Donald Trump re-elected. Now Trump and the Republicans face the same crisis, only compounded by a reckless war of choice with Iran.
Yet a rude awakening awaits those who imagine that ending the Iran war or booting the GOP from power will end the inflation crisis. For much of this decade, inflation has been a problem for consumers and firms, and a salient political issue for voters. And although policy choices like the Iran war have no doubt played a role, today’s structural inflation has a much deeper cause: it is the unintended price of voters’ choice to end the model of neoliberal globalization that defined the post-Cold War period.
The process of deglobalization began under Trump I, accelerated during Covid and Biden’s tenure, and has become more destabilizing since Trump’s return to the Oval Office. It is greater and more challenging than any one policy agenda. High costs of living are thus likely to remain impervious to changes in policy or shifts in party power.
Inflation is baked into deglobalization. Major revisions to global trade — whether stemming from war and sanctions, protectionist concerns, or efforts to combat climate change — entail major changes to production and distribution. These changes are far from seamless, since they involve finding new suppliers, retraining workers, or rebuilding factories. At each step, there is a risk of bottlenecks, shortages, and price spikes.
Sweeping programs to reduce immigration likewise reverberate throughout the labor market, creating disruptions in critical sectors like home construction, food production, and health care. “Choke points” — a term that became ubiquitous at the height of the pandemic lockdowns — will continue to multiply, self-inflicted or not. Consequently, rising prices show no sign of abating, despite optimistic forecasts by the Federal Reserve that interest-rate hikes will bring inflation close to its 2% target by 2028.
Of course, the main driver of inflation at present is the cost of energy, brought on by US foreign policy — another dark irony, given Trump’s disdain for fuel alternatives and pledge of $2 gas. The high cost of energy affects not just home utilities and the commute to work, but nearly every system that furnishes the basic comforts to which Americans are accustomed. It also exacerbates the nationwide housing shortage: building becomes more expensive, as does borrowing (the latter prompting current owners to hold on to their current homes purchased at lower rates).
But the Fed’s main method for taming inflation, rate hikes, afflicts workers and small businesses who have weathered messy tariffs and exploding health bills. As household debt continues to reach historic levels, higher interest rates mean heftier borrowing costs. Mortgages, car payments, and credit-card bills — all get more expensive to carry, so more of each paycheck goes to interest. Simply treading water in today’s economy will become more expensive, further diminishing purchasing power.
Yet a Democratic Congress is unlikely to generate a different and workable approach. The simple dynamic of divided government and mutual enmity with the White House is certainly one factor, as is the Fed’s insulated control over monetary policy. But there are deeper political reasons at play that inhibit Democrats from offering more than vague promises to crack down on price gougers, reclaim Congress’s authority over trade policy, and curb immigration raids.
For starters, the “easiest” solutions to inflation are the very policies that gave rise to Trumpian populism in the first place. That naturally has created some hesitation in the Democratic coalition to do more than attack Trump’s overreach and corruption. A return to “free trade,” for instance, would probably ease price pressures. Yet the bipartisan embrace of trade during the 1990s and early 2000s devastated America’s industrial heartlands, creating the working-class grievances that made Trump appear attractive beginning in 2015. While many former Trump supporters now bemoan his tariffs, this frustration doesn’t amount to a wholesale rejection of all protectionism — at least, not in places like Michigan, Wisconsin, and Pennsylvania, where Democrats have suffered the most humbling setbacks.
The same predicament is true of immigration. Labor shortages are real, prompting mainstream economists and business lobbies to urge a more liberal approach. But it would be politically untenable to resume a laissez-faire border policy akin to Biden’s, which not only worsened Democrats’ standing with traditional blue-collar workers, but fueled defections to Trump in normally blue, immigrant-heavy cities and counties in 2024. A majority of voters may now recoil at the inhumane methods employed by Trump’s deportation regime. Yet the preference for a tighter border overall will prevail so long as immigration flows are associated not with lower costs and dynamic growth, but new burdens on housing, public services, the safety net, and social cohesion.
In both cases — trade and the border — Democrats are chary of defending the pre-Trump state of affairs. In an electoral environment that could see the first major upsets in red states in a generation, Democrats don’t want to alienate Right-leaning independents and other swing voters fed up with incumbent Republicans. Surprisingly competitive Farm Belt states, such as Iowa, Kansas, and Nebraska, are emblematic: their electorates are unhappy with ICE’s unaccountable conduct and the high prices generated by Trump’s tariffs, but they aren’t keen to return to globalization, either.
As if that weren’t complicated enough for Democrats, they also have their “Brahmin Left” base to worry about. Mainstream Democrats, after all, once loudly touted the benefits, cultural and economic, of globalization. They thus can’t afford to be seen by the liberal base as capitulating to any aspect of Trump’s restrictionist agenda. Democrats, accordingly, are reluctant to thread together a set of proposals that may irk “woke” progressives in the short-term, even if such policies would help set the stage for a commanding Democratic victory in 2028.
The Right, meanwhile, seems paralyzed by Trump’s succession of own goals on inflation. Retreating from either protectionism or hard-line immigration policies is a political no-go as long as Trump leads the party. That has forced vulnerable Republicans to defend his record, even though many privately regret shredding the neoliberal order that Reaganite Republicans had pursued before Trump. Republicans are also afraid to break from the White House’s accelerationist position on the AI build-out, the energy demands of which are inflationary and probably unconstrained by high interest rates.
Meanwhile, for all the fanfare over the past decade about the GOP becoming a vehicle for the “multiracial working class,” fealty to corporate profits remains an article of faith across the party. A few individual Republicans may gesture toward collaborating with Democrats to tackle the cost of living, but when push comes to shove, the legislation and congressional votes never actually materialize. Deviating from the conservative donor class on this point is punished severely.
Partisan myopia also forces both parties into positions that prolong inflation. Neither party, for example, is prepared to reform the immigration system in a manner that would promote non-inflationary growth while also prioritizing social stability. That would mean some combination of external and internal enforcement (anathema to many Democrats) and a willingness to grant citizenship to long-standing residents and welcome foreign workers to labor-starved sectors (a nonstarter for Republican hawks).
Nor can the two parties agree on which sectors warrant tailored industrial protection and which would benefit from integration with traditional allies in Europe and middle-income states in Asia and Latin America. Silicon Valley’s unrivaled political influence is another dilemma. Democrats increasingly talk tough about Big Tech but are hardly unanimous about how and to what extent it can and should be reined in.
In short: having largely spearheaded deglobalization, America is saddled with its inflationary consequences due to a party system that failed to anticipate them.
To be sure, the Democrats’ recently revived antitrust tradition is, in part, about lowering prices (on the theory that consolidation allows sellers to set the price). And there have also been more radical proposals for targeted price controls. But such reforms aren’t realistically in the offing for the remainder of Trump’s term. Thus, Democrats’ affordability agenda in 2026 is really a pledge to confront high prices if their party is also returned to the White House — in two years.
Yet even assuming Democrats take back the White House and put their backs into it, the affordability effort will still likely fall short of solving persistent, elevated inflation through the 2030s. Unstoppable structural changes in the world economy, even more than dysfunctional domestic politics, present the biggest challenge to an inflation-weary America. Multipolarity — the rise of multiple nodes of global power — all but assures more unpredictable alliances and more exposed supply chains, with corresponding impacts on prices. And although the dollar’s hegemony shows no sign of collapsing in the near term, the prospect of “de-dollarization” is no longer quite so remote. But even if that challenge to the world’s reserve currency is forestalled, the average American consumer may nevertheless lose his place atop a global food chain that assured him a “comfortable lifestyle” even as his wages flatlined.
The peak years of neoliberal globalization — from the fall of the Berlin Wall to the 2008 financial crisis — were predicated on a rosy formula that assumed ever-deepening economic integration between advanced economies and rapidly industrializing ones like China. Price stability could be achieved through anemic wage growth in the Global North and labor repression in the Global South; diversified supply chains with leaps in logistics that enabled “just-in-time” production and shipping; and unprecedented economies of scale that would seemingly keep essentials affordable even as massive conglomerates increased their market share (and thus their power to set prices as they saw fit).
That formula rested on many faulty assumptions, not least the notion that America would do everything possible to perpetuate the liberal international system it had constructed since World War II. Instead, Washington has instigated the system’s rupture. The arrangements that underpinned the unofficial bargain between America’s business elites and the rest of society — above all, the juggernaut trade relationship known as “Chimerica” — have been hammered and fractured by Trump without consideration of America’s underlying socioeconomic problems. Put another way: Trump gleefully broke Chimerica, without giving much thought to problems like infrastructure, workforce training, health costs, corporate power, and regional development.
Rapprochement with Beijing by either political party won’t inherently undo the damage. Worse, America’s image as a declining, volatile hegemon has led other countries to imagine a development path unyoked from the appetites and aspirations of American consumers. On top of more wars, more energy shocks, and more extreme weather events, that dynamic will make Trump’s inaugural boast of a “new golden age” all the more disconnected from the realities of the global economy and America’s fading stature within it.
Democrats are delighting in the possibility that Trump’s hubris may have finally caught up with him. Still, those who are alert to the broader fragmentation of the world economy should beware an empty triumphalism. Inflation is here to stay for the foreseeable future.
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