Trump Claims Combating Inflation Demands Lower Energy Expenses and a Supply Chain Revamp

During the interview, in which he was named “Person of the Year” for 2024, Trump was asked whether failing to fulfill his promise to reduce grocery prices would mean his presidency is a “failure.”

According to a 2023 study conducted by the Federal Reserve Bank of San Francisco, supply chain disruptions accounted for approximately 60 percent of the above-trend inflation experienced in 2021 and 2022, a period when inflation peaked at 9 percent. A separate study from the Cleveland Fed also highlighted supply chain disruptions as the primary driver of inflation from January 2020 through December 2022.

Additionally, a 2023 study by the National Bureau of Economic Research (NBER) concluded that supply-side shocks were the main causes of inflation during the early stages of the pandemic and afterward. However, in subsequent stages, demand-side factors became more prominent due to large-scale government spending that intensified consumer demand, contributed to labor market tightness, and applied upward pressure on wages.

A more recent analysis based on the Federal Reserve’s Global Supply Chain Pressure Index (GSCPI), which monitors elements like shipping and airfreight expenses, provides further insights. The GSCPI indicated extreme supply chain pressures during 2021 and 2022, with readings surpassing +4, significantly above the typical range of +1 to -1 observed from 2010 to early 2020. Starting in February 2023, the GSCPI shifted to negative territory, indicating a reduction in supply chain pressures, and has generally stayed just below zero thereafter.

Although the mostly negative GSCPI values in recent months imply that supply chains have largely returned to normal, they may not completely negate the inflationary effects from prior extreme pressures. The Producer Price Index (PPI), which measures business input costs, illustrates this complexity. In November, the headline PPI increased by 0.4 percent month-over-month and 3 percent year-over-year. Core PPI, excluding volatile food and energy prices, rose by 0.2 percent monthly and 3.4 percent annually, indicating that some supply-side challenges persist in specific industries.

EJ Antoni, an economist at the Heritage Foundation, told The Epoch Times that the recent normalization of supply chains suggests that demand-side elements are now the primary contributors to the current inflation scenario.

“Inflation didn’t occur simply because supply chains were disrupted; it was driven by the government spending, borrowing, and printing trillions of dollars it didn’t possess,” Antoni remarked.

Trump did not specify particular solutions for ongoing supply chain challenges, but he reiterated the necessity of addressing them within a broader strategy. His overall plan to combat inflation entails reducing dependence on overseas supply chains by promoting domestic production. For example, he has proposed a reduction of the corporate tax rate from 21 percent to 15 percent for firms manufacturing within the United States.

Alongside focusing on energy and supply chains, Trump has promised to extend tax cuts, simplify regulations, and renegotiate trade agreements to enhance American industry. “We’ll see how it unfolds,” Trump mentioned during the Time interview, asserting that “this country is overwhelmed with rules, regulations, and, quite frankly, people who are unnecessary.”

He emphasized plans to streamline the federal workforce by transitioning employees from government roles to the private sector. “We will need many people in a variety of jobs. Our goal is to place individuals in private sector positions where they can perform better and be more productive,” he suggested, implying that this approach could enhance economic efficiency and alleviate private sector wage pressures.

Kevin Stocklin contributed to this report.