Are you ready for life to become more expensive? The January 2025 CPI report shows that inflation has increased. The year-on-year CPI was 3%. This is exactly what I chose when I was surveyed last year. Inflation at 3% is poor as the Fed has been trying to reduce inflation to 2% for several years. Investors expect the Fed to lower interest rates soon, but they may wait until inflation is slightly lower. Typically, lowering interest rates will increase inflation. Anyway, this means mortgage rates will continue to stay around 7%. Aspiring homeowners will have to pay more for their housing. Although, I think 7% of people are not bad. In 1999, our first home had a mortgage of over 8%. When interest rates fall, you just refinance.
Other aspects of life will also become more expensive in the coming years. President Trump is moving forward with his tariffs. He imposed a 25% tariff on steel and an additional 10% tariff on everything in China. Be prepared to pay more for cars, appliances, construction, toys and all the items we purchase.
Trump also signed an executive order to impose a 25% tariff on imports from Canada and Mexico, but that has been postponed to March. These neighbors are our largest trading partners. The United States imports energy, vehicles, machinery and a lot of food from it. Higher grocery prices are inevitable, with an additional cost of 25%. Importers pay tariffs, and they will pass most of them to consumers. I think inflation will increase to at least 5% in 2025. Some say that tariffs in Canada and Mexico are just a strategy to increase immigration and drug enforcement, but I doubt that. Trump falls in love with tariffs and he will push them forward. Do you know our neighbors hate us now? How would you feel if your next door neighbor keeps threatening you?
In RB40 Family
Many American voters choose Trump because they think he will make life more affordable. They want things to cost the same as they were before the pandemic. But those days are gone forever. Even if inflation drops to 0%, everything is already more expensive than in 2020. Low inflation does not mean that prices will fall. Most consumers don’t understand this. Not back to the good times in the past. Instead, tariffs will increase inflation and life will become more expensive.
I don’t know what else we can do to combat the high inflation of RB40 households. We have lived modestly. We buy store brands, cook at home, and share a car. Fortunately, our investment has also increased significantly over the past few years. Even at the higher prices, we still feel very rich. Anyway, that’s how I’m going to fight inflation in the next few years.
- Buy large items now Increase before the price. Last year I already had a new washer and dryer. This year, I want to remodel our kitchen and bathroom. I’ll do this as soon as possible, but it may be too late. These prices may have risen.
- Delayed purchase 4 years. Once voters see how tariffs affect inflation and the economy, maybe things will improve. I will keep the old car for at least 4 years. It still works well.
- Continue to live a modest lifestyle. We will travel in the United States, not abroad. The National Park Service fired hundreds of workers, but I hope camping will be fine. We’ll see how things are going. Maybe we’ll go to state parks.
- Continue to invest. Trump and Elon Musk will do their best to enrich the rich in the next 4 years. We need to keep investing and try to capture it. This is the only way to keep inflation ahead of the list. In the long run, the stock market will outperform inflation. If consumer confidence continues to decline, we will have to hold on to the roller coaster.
That’s all we can do at this point. American consumers vote for Trump because they think he will help make life more affordable. I can’t see how the price rise and the massive unemployment happen. I hope he proves that I am wrong.
How do you view tariffs? Will they bring back high inflation? How will you fight inflation?
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