Trump Trade War: Food Tariffs Dropped Amid Soaring Prices and Market Stress

Tariff Rollback Amid Food Price Backlash

President Donald Trump rolled back tariffs on more than 200 food items. The exemption list includes everyday essentials such as beef, bananas, coffee, and orange juice, all of which have seen steep price increases. The rollback takes effect retroactively and comes amid growing public frustration over rising grocery bills.

Officials acknowledged that specific tariffs may contribute to higher prices but stated that overall inflation remains contained. The exemption was described as a strategic step, especially for items not made locally. Authorities also pointed to new trade agreements with countries such as Argentina, Ecuador, Guatemala, and El Salvador, noting that the exemptions are part of broader trade progress.

Rising Inflation Puts Affordability at the Center of Public Concern

Inflation has become a significant concern for voters. In recent elections in Virginia, New Jersey, and New York, Democrats won several races by focusing on the rising cost of living. Food prices were a significant concern in their campaigns.

Ground beef prices surged nearly 13%, while steak costs rose 17% year-over-year. Meanwhile, banana prices increased by 7%, while tomato prices rose by 1%, and overall food-at-home inflation reached 2.7% in September. Although the U.S. is a major beef producer, cattle shortages have limited supply and kept prices elevated.

Trump announced a plan to give $2,000 to lower- and middle-income Americans next year, using money collected from tariffs. Some observers believe the move is a response to economic pressures linked to rising consumer prices. Moreover, the policy shift reflects growing concern about the broader impact of tariffs on affordability.

Wider Economic Strain Emerges from Trade Policy Effects

Trump’s trade strategy includes a 10% base tariff on imports from every country, along with additional state-specific duties. Many economists argue that tariffs have been a direct source of inflation, potentially contributing to increased inflation.

The tariff-related costs will continue rising as more companies pass along expenses to consumers. The Cass Freight Index also declined to recessionary thresholds, as seen in the chart below.

The chart below confirms that the year-over-year change in the Cass Freight Index indicates a warning of a sharp contraction in shipment volumes. This freight weakness, along with lower industrial activity, points to a broader economic slowdown.

Market Strength Masks Underlying Liquidity and Price Risks

Despite broader macroeconomic concerns, the S&P 500 remains at elevated levels. However, the index is currently consolidating near overbought territory, signaling growing uncertainty. At the same time, financial liquidity remains tight.

The daily chart of the S&P 500 shows that the index has reached the red dotted trendline, indicating uncertainty in the short term. A breakout above the $6,900 level could signal further upside toward the $7,000 mark. However, a breakdown below $6,600 would confirm a negative trend and lead to a decline toward the $6,200 level.

The Secured Overnight Financing Rate (SOFR) has risen to 4.0%, aligning with the Federal Reserve’s standing repo facility. This suggests that banks are paying more to access short-term funding, which is a classic sign of stress in money markets.

Despite the extremely overbought conditions in the S&P 500, the overall outlook remains strongly bullish. This is supported by the formation of an ascending broadening wedge pattern that has been developing since the 2016 bottom.

Additionally, the presence of an inverted head and shoulders pattern reinforces the bullish momentum. A pullback in the S&P 500 from its overbought condition may present a buying opportunity for investors.

Conclusion: Economic Warning Signs Grow Beyond Tariffs

The effects of the trade war are becoming increasingly difficult to ignore. Tariff rollbacks reflect mounting pressure from rising food prices and growing public concern. Inflation is no longer just a headline; it has become a daily reality, and policy responses, such as tariff exemptions and proposed payments, highlight affordability as a central economic issue.

Meanwhile, the market is showing mixed signals. The S&P 500 remains near record highs, but liquidity conditions are tightening, and technical patterns suggest a potential top may be forming. Freight data and industrial output also point to underlying economic weakness. If these trends persist, the long-term impact of the trade war could extend to broader areas of the economy.