US President Donald Trump has intensified pressure on American companies to cut prices in an effort to lower inflation and reduce the political cost of the cost of living ahead of the November midterm elections. According to Financial Times, the Trump administration has directly intervened in the pricing of some products in recent weeks.
Gas stations were warned they would face 'major consequences' if they did not lower prices. Additionally, the Walmart chain announced it had cut prices on thousands of products at the administration's request, and Trump called on other retailers to take the same step.
These moves were criticized by economists and analysts as a departure from free-market principles. The criticism followed earlier interventions such as pressuring companies to invest domestically, taking stakes in some projects, and tying regulatory approvals to financial commitments.
Impact of the Iran War on Inflation
The rise in fuel prices triggered by the war with Iran pushed annual US inflation to 4.2% in May. The average gasoline price rose to about $3.88 per gallon, an increase of nearly 30% since the start of the war, while diesel prices jumped by about a third.
High energy costs have rippled through the broader economy. US fruit and vegetable prices rose 6% year-on-year due to higher transportation costs. According to Brown University estimates, the war increased American households' fuel spending by an average of more than $500.
The US administration argues that its measures aim to increase the supply of goods and lower prices, and that they do not contradict free-market principles. Critics, however, warn that political pressure on companies could disrupt market mechanisms and weaken investment and pricing decisions in the long run.
Trump is under political pressure, especially as the November congressional midterm elections approach, due to the rising cost of living. According to a Financial Times poll, 67% of voters are dissatisfied with the administration's handling of the cost-of-living crisis. Democrats argue that the president's policies, including the Iran war and tariffs, have contributed to the current wave of inflation.
