Trump Claims Victory Over Inflation at Davos, Economists Disagree

During a speech at the World Economic Forum in Davos, Switzerland, on Wednesday, January 21, 2026, U.S. President Donald Trump asserted that his administration had “defeated” inflation and significantly reduced consumer prices over the past year. He claimed the U.S. Has “virtually no inflation,” citing declines in the costs of groceries, energy, airfares, mortgage rates, rent, and car payments. However, economic data and analysis suggest a more nuanced picture.

Inflation Remains Elevated, Despite Some Price Decreases

Even as some prices have indeed decreased, the overall inflation rate remains above the Federal Reserve’s 2% target. The consumer price index (CPI) was at a 2.7% annual rate in December 2025, a rate economists consider elevated according to the Associated Press. Core CPI, which excludes volatile energy and food prices, stood at 2.6%.

“To say the US has ‘virtually no inflation’ is factually incorrect and a classic Trump overstatement,” stated Thomas Ryan, a North America economist at Capital Economics as reported by the AP. Mark Zandi, chief economist at Moody’s, similarly noted that inflation remains “uncomfortably high,” particularly for lower and middle-income Americans.

The Impact of Tariffs

Ironically, economists point to Trump’s own tariff policies as a contributing factor preventing a full victory over inflation. The U.S. Currently has an average effective tariff rate of 17.5%, the highest since 1932 according to analysis from Yale University’s Budget Lab. This includes a potential 10% tariff threatened on eight European allies.

John Riccio, associate director of policy analysis at the Yale Budget Lab, estimates that the average consumer will pay an additional $1,300 to $1,700 in 2026 due to these tariffs, compared to pre-2025 levels as reported by the AP. Joseph Gagnon, senior fellow at the Peterson Institute for International Economics, suggests that tariffs are the primary reason inflation hasn’t reached the Fed’s 2% target.

A Closer Look at Specific Expenses

• Mortgages: Mortgage rates have decreased, averaging 6.21% as of Tuesday, January 20, 2026, down from over 7% in January 2025, partially due to Trump’s directive to Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds.
• Rent: National rent index fell 0.8% in December, marking five consecutive months of decline, and was down 1.3% year-over-year, reaching a median of $1,356.
• Car Payments: Car payments are increasing, with the average monthly payment for a recent vehicle reaching a record high of $772 in the fourth quarter of 2025.
• Energy: Gasoline prices have fallen nearly 10% to an average of $2.81 per gallon as of January 19, 2026, compared to $3.11 on January 20, 2025. However, household electricity prices have risen nearly 7% over the past year.
• Groceries: Grocery prices have risen a modest 2.4% over the past year.
• Airfare: Airline fares declined more than 3% year-over-year in December.

Looking Ahead

While inflation is nearing the Federal Reserve’s target, economists caution that tariffs and other factors continue to exert upward pressure on prices. The extent to which consumers will feel the benefits of lower inflation will depend on how these competing forces play out in the coming months.