The Sydney Morning Herald
· collected 2026-10-13 · by Stephen Bartholomeusz
Donald Trump’s “diesel-for-sanctions” deal with Vladimir Putin is an indication of how desperate he has become in the lead-up to next month’s midterm elections.
asserted
he → become → elections
Rather than seeking to shift blame for his polling woes to Ukraine, he should look in the mirror.
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he → seek → mirror
When the latest inflation data is released on Wednesday morning in the US, it is expected to show that the inflation rate in the world’s largest economy rose again in September, adding to the cost-of-living pressures that are the key issue in the midterms.
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that → release → midterms
The consensus among US economists is that headline inflation will have risen from August’s 3.4 per cent to 3.6 per cent or 3.7 per cent, with “core” inflation (excluding energy and food costs) either steady or edging up from 2.5 per cent to 2.4 per cent.
asserted
inflation → rise → cent
That disparity between headline and core rates points to the major factor in the persistently high US inflation rate -- the surge in gasoline and diesel prices that has occurred as a result of Trump’s decision to go to war in the Middle East.
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that → point → East
The day before the February attacks by the US and Israel on Iran, oil was trading at $US70 a barrel.
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oil → trade → US70
US gasoline prices average $US2.28 a gallon on the eve of the attacks.
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prices → average → attacks
Today, they average $US4.35 a gallon.
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they → average → US4.35
Diesel cost, on average, about $3.80 a gallon on February 27.
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Diesel → cost → February
As has often been the case with Trump, his ego and impulses – in this case the desire to bend the Fed to his will, or in the war with Iran, his expectations of an easy and glorious victory – undermine his ambitions.
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ego → bend → ambitions
Those increased costs not only feed directly into households’ costs of living, but they also, over time, bleed into the wider economy as the delayed impact on transport costs and agricultural production flows through and impacts consumer prices and corporate margins.
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impact → increase → prices
When the members of the Federal Reserve Bank’s Open Market Committee meet in a fortnight to decide whether to raise their policy rate for a second successive meeting, however, they won’t just be considering the direct and indirect costs of energy.
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they → meet → energy
The focus on energy costs has tended to relegate the other major Trump-inspired source of inflation to the sidelines of discussion - but, as with fuel prices, the impact of his tariffs is still working its way through the US economy.
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impact → tend → economy
The New York Fed produced a research paper last year that concluded that about 90 per cent of Trump’s 2025 tariffs were passed through to US import prices and were absorbed by domestic businesses and consumers.
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cent → produce → businesses
Last week, the Fed researchers produced an update.
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researchers → produce → update
They found that for every percentage point increase in average tariffs, consumer prices increased by about a quarter of a per cent after one year.
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prices → find → year
About two-thirds of the effect arose because tariffs raised the prices of imported goods, while the rest arose indirectly as US companies paid more for imported parts and materials and because US producers raised their prices when competing imports cost more.
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imports → arise → more
A good illustration of the second round effects of the tariffs is steel, where Trump imposed a 50 per cent tariff on imports in February last year.
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Trump → impose → February
US steel prices have risen faster than anywhere else in the world, with hot-rolled coil prices up more than half.
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prices → rise → world
That’s great and immensely profitable for the handful of US domestic steel mills, but not so great for downstream manufacturers and, ultimately, US consumers.
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That → ’ → manufacturers
The Fed analysis found that the direct effect of higher import prices flowed through quite quickly.
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effect → find → prices
About half the increased costs were in place after three months and all of them by six months, with retailers taking a few months to lift their prices.
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retailers → increase → prices
The indirect effects – the increased input costs to US manufacturers – took longer to surface.
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effects → increase → manufacturers
In the first six months, US producer prices rose slightly, but the response then builds and roughly doubles over the next six months, they said.
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they → rise → months
Most of Trump’s baseline tariffs on the rest of the world were implemented, with delays, in the middle of last year.
Having been deemed illegal by the Supreme Court in February, those “Liberation Day” tariffs were quickly replaced by interim tariffs with a uniform rate of 10 per cent, until they were in turn displaced by the “forced labour” tariffs of either 10 per cent or 12.5 per cent on 60 economies that Trump announced in July this year.
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Trump → implement → July
There are, of course, other sector-specific tariffs that Trump imposed last year on “national security” and other grounds, like those on steel and aluminium, but the significant point here is that the tariffs have been a moving feast and that the delay before their full impact on end-prices is felt means they are still feeding into the inflation rate.
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they → be → rate
The Fed researchers said that, in a scenario where a 10 per cent tariff is imposed on all imports (which is the base case for Trump’s forced labour tariffs) consumer goods prices would be 2.6 per cent higher after 12 months, or about a quarter of the tariff increase.
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prices → say → increase
Thus, the impact of both higher energy costs as a result of the war on Iran and higher consumer goods prices due to Trump’s tariffs is still flowing through the US economy.
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impact → flow → economy
The inflation rate also isn’t being helped by the massive investments being made in artificial intelligence and its flow-on effects to the prices of capital, semiconductors, construction costs and electricity and water.
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rate → help → capital
AI companies are spending about $US750 billion ($1.1 trillion) this year and are forecast to spend at least another $US2 trillion (if the boom in the sector lasts) over the next two years.
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boom → spend → years
In the long run, AI may (or may not) increase productivity and decrease inflation rates but, in the near term, the frenzy adds to inflation.
uncertain
frenzy → increase → inflation
Trump’s deal with Putin will have a minor impact on US diesel prices, if any.
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deal → have → prices
The volumes of diesel are too small to have a material effect.
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volumes → have → effect
If the war in Iran ended tomorrow, it would have a much greater impact, even though it might take months and, in some instances years, for the damage done to infrastructure in the Middle East and confidence in passing through the Strait of Hormuz to be fully remedied and supplies of oil and refined products to be fully restored.
uncertain
supplies → end → oil
Similarly, if Trump stopped announcing new tariffs, or better still withdrew all those he’s put in place or has announced, the inflation rate would subside and probably be very close to the Fed’s 2 per cent target.
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rate → stop → target
Unless there is an increase in the inflation rate above expectations this week, the Fed is likely to sit on its hands later this month rather that raise rates again days before the midterms.
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Fed → be → midterms
Market expectations have fallen back from a near-certainty of another 25 basis point increase following Fed chairman Kevin Warsh’s hawkish commentary after last month’s meeting.
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expectations → fall → meeting
They are now pricing in a less than 20 per cent chance that the Fed will move again this month.
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Fed → price → chance
A rate rise is fully priced in for December.
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rise → price → December
In any event, a cut in interest rates to the 1 per cent or less that Trump consistently calls for aren’t going to happen while the inflation rate remains pumped up by his war and tariffs – unless he can find another solution.
And he thinks he has one.
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he → call → one
…and 6 more, not listed.
The Aporia
