Even Without Medicaid Cuts Apparent Yet, Trump’s Tariffs Could Devastate GOP Reelection Campaigns

Is Stagflation Season Coming Just Just In Time For The Midterms?

Yesterday a trio of Politico reporters speculated that Trump’s and the GOP’s unpopular Big Ugly Bill may not be a silver bullet for the Democrats in the midterms. OK, well “may” covers a lot of ground, so a hard premise to argue with… if there even are silver bullets. “Democrats,” they wrote, “are banking on backlash to Republicans’ Medicaid cuts to boost them in next year’s midterms. There’s just one problem: The cuts haven’t happened yet. Republicans delayed work requirements until 2027 and financing changes until 2028. They also frontloaded their One Big Beautiful Bill Act with tax breaks that voters are likely to see sooner. ‘If we say they took it from you, but it hasn’t happened yet, it just complicates it,’ said California-based Democratic strategist Doug Herman. That’s leaving some Democrats concerned that their Medicaid-focused messaging might not hit home before November 2026— and blunt their efforts to use the backlash to President Donald Trump’s signature legislative achievement to fuel a Democratic wave next year.”

Polling shows voters are receiving mixed messages on Medicaid. A tracking survey from nonprofit health policy group KFF shows 63 percent of independents said they believe the bill will strip health care coverage from people who need it, but they also broadly support adding work requirement to the program. 

…Democrats are committed to hammering Republicans over the vote no matter what.

No one is counting on just one issue anyway and, for example this Big Ugly Bill-related ad, running in western Wisconsin, looks pretty effective to progressive Democratic candidate Emily Berge:

But let’s imagine for a moment that the Big Ugly Bill doesn’t do what Democrats think it will. Yesterday, Annie Lowrey warned Atlantic readers that there’s another reason to start tightening their belts. If voters have forgotten about the deranged Trump trade wars with the world, the trade war hasn’t gone away. “This week,” she wrote, “Trump reignited the global financial conflict he started in January, sending letters threatening new tariff rates to nearly two dozen countries. Starting in August, American importers will pay a 25 percent tax on goods from South Korea and Japan, a 35 percent tax on goods from Canada and Bangladesh, and a 50 percent tax on goods from Brazil unless those countries agree to bilateral deals. Additionally, Trump warned he would slap tariffs on goods from any country “aligned” with the “anti-American policies” of China, India and other industrial powerhouses— no further details given— and put a 50 percent levy on imported copper, used to build homes, electronics and utility systems. The summer tariff announcement was characteristic of all the White House’s tariff announcements this year: draconian, nonsensical and hard to take seriously.”

Businesses are struggling to negotiate the uncertainty created by the White House. Trump’s tariffs are forcing up consumer costs and damaging firms. And the latest renewal of the trade war will make the economy worse.

… Businesses thus far have sheltered American consumers from tariffs by eating some of the cost themselves and relying on stockpiled goods. As a result, inflation has remained subdued and economic growth strong enough through the first half of the year. But firms can keep only so much stock in warehouses. Analysts at BNP Paribas, a banking group, estimate that inventories will “clear” by the end of the summer, and prices will rise in turn. Right now, American consumers are facing an 18 percent effective tariff rate, the highest since 1934, the Yale Budget Lab estimates. Households will pay an average of $2,400 more for goods this calendar year, thanks to Trump’s policies.

Colby Smith and Tony Romm noted that Señor TACO’s latest escalation, including 30 percent levies on the European Union, could deliver a much more painful blow to the United States. If the tariffs go into effect on Aug. 1, it could unleash the sort of devastation to consumers and businesses that economists have long worried about and Trump has mostly avoided. Their fear stems from the specter of a stagflationary shock, in which inflation intensifies as growth stalls… Tariffs have already had an impact on the economy in a number of ways, and the levies now threatened against the European Union risk causing even more painful disruptions, given that the bloc and the United States are each other’s largest trading partners.

… Many businesses have held off on raising prices as they whittle down their inventories or have chosen to absorb some of the higher costs to avoid deterring customers already choosier about how they spend. That has helped keep inflation relatively muted in recent months.

However, price pressures are expected to start heating up as a result of tariffs, according to forecasts for June’s Consumer Price Index report, which will be released by the Bureau of Labor Statistics on Tuesday.

Businesses across the country have also held off on making big changes to their work force while delaying costly, long-term investments for the time being.

What has resulted is an economy that appears to still be in solid shape, even as it shows clear signs of slowing down.

That resilience has only emboldened Trump, who has proclaimed in recent weeks that stocks are rising, and federal revenues are growing, all in the months since he first announced, then paused, many of his withering tariffs.

“Look at our numbers,” Trump said in the Oval Office on Monday. “The economy is very strong.”

… [E]conomists warn it is just a matter of time before tariffs, if they take effect at the levels Trump has threatened, start to bite.

“It is a tax first and foremost, a tax on corporate earnings,” said Steven Blitz, chief U.S. economist at GlobalData TS Lombard.

At some point, businesses will exhaust their stash of goods, meaning they will have to import new supply at higher prices. That will force companies to make tough choices, deciding between passing along those costs to their customers or finding other ways to cut back to stay profitable.

“Business are absorbing some of the tariffs but either way the economy will be hurt by tariffs,” said Ryan Sweet, chief U.S. economist at Oxford Economics, a forecasting firm. “If businesses eat more than expected they will find ways to cut costs to protect profit margins, putting cutting workers or hours on the table.”

Sweet estimates that the current mix of agreements and renewed tariff threats puts the effective tariff rate just under 20 percent. That is below the level the president initially tried to push through in April before financial markets seized up, but it is above what was expected just a couple of weeks ago. And that estimate assumes Europe is able to negotiate down from Trump’s threat of 30 percent tariffs.

In other words, even if the Big Ugly Bill doesn’t produce the political backlash Democrats expect, Trump’s revived tariff blitz probably will. The inventory cushion is about to disappear and if tariffs kick in at the levels Señor TACO is threatening, the result won’t just be higher prices on foreign cars, wines and copper wiring; it’ll be a cascade of inflationary pressure, consumer sticker shock and supply chain disruption— all just as voters start paying closer attention to their wallets in the run-up to the 2026 midterms. Economists warn of a looming stagflationary shock: price spikes combined with economic stagnation or even contraction. And while Trump may try to spin the chaos as a show of strength, most Americans know who to blame when their grocery bills skyrocket and layoffs begin to hit.

Republicans may think they can campaign on culture wars and crime stats, but no amount of fearmongering is going to cancel out the economic pain that’s probably coming. If tariffs start to really bite by fall, they could poison the very conditions the GOP needs to even have a remote chance of holding their House majority— especially in swing districts where voters still care more about prices than political theater. The image of a “strong economy” is paper-thin, propped up by temporary corporate buffers and Trumpian bravado. When that image collapses— and it is likely to— it won’t just be Wall Street that feels it. Main Street will, too. And come November 2026, angry voters might decide they’ve had enough of Trump’s trade tantrums— and the Republicans who enabled them.