The Shield That Defeats Itself

In May, President Trump proposed suspending the 18.4-cent federal gas tax. Fuel prices had reached $4.52 a gallon, a 50 percent increase since the first strikes on Iran in late February. ^[1]

I don't think about Americans' financial situation. I don't think about anybody. I think about one thing: We cannot let Iran have a nuclear weapon. That's all. — Donald Trump

In the same appearance, a reporter asked about the financial strain on American households. The president answered without pausing.

I want to suspend the federal gas tax "for a period of time" to help drivers. — Donald Trump

The two statements sit beside each other as a compressed diagram of the administration's economic posture: a hand extended with relief and a hand that does not know, or will not say, what it is relieving. The posture is not merely contradictory in tone. It is contradictory in structure — a closed circuit in which each policy lever the administration pulls makes the next one harder to hold. The first lever is the tariff wall. The administration has imposed duties of 10 to 12.5 percent on goods from more than 80 countries, generating $130 billion in revenue. ^[2][3] Businesses that absorbed roughly 80 percent of those costs in 2025 began passing them to consumers in early 2026. The Nonpartisan Tax Foundation found tariffs raised average retail prices by roughly 2.1 percent, with specific categories surging far higher: furniture 10 percent, household textiles 9 percent, cameras 8 percent. ^[4] Federal Reserve Chair Powell stated plainly that tariffs were responsible for inflation exceeding the 2 percent target. ^[3] But the tariffs do not only raise the price of furniture and coffee. They raise the price of the grid itself. A Lawrence Berkeley National Laboratory and Department of Energy study published in June identified the headwinds explicitly. ^[5]

the scale and growth of computational demand more than offset these efficiency gains, leading to continued increases in absolute electricity consumption. — Lawrence Berkeley National Laboratory

We estimate that data centers caused average retail electricity rates to fall modestly in the United States from 2015 to 2024 using an instrumental variables approach. — John Bistline

This is the first point where the circuit closes on itself. The administration is simultaneously trying to force an unprecedented expansion of the American grid — to power the AI data centers it has designated critical national security infrastructure — while taxing the solar panels that expansion requires. ^[6] The second lever is the shield the administration built to contain the political cost of that expansion. In his February State of the Union, Trump launched the Ratepayer Protection Pledge, securing commitments from Amazon, Google, Meta, Microsoft, OpenAI, Oracle, and xAI. ^[7]

It’s a big deal; it’s going to have a tremendous impact on electricity costs… Under this new agreement, Big Tech companies are committing to fully cover the cost of increased electricity production required for AI data centers — and that would mean prices for American communities will not go up, but in many cases, will actually come down. — Donald Trump

Critics named the mechanism for what it was.

We're telling the major tech companies that they have the obligation to provide for their own power needs. — Donald Trump

The pledge has no enforcement mechanism. And the numbers have not cooperated. Electricity prices rose 6.3 percent in January alone, significantly exceeding the 2.4 percent overall inflation rate. ^[8] For the full year, the increase reached 6.9 percent — more than double the pace of broader inflation. ^[9] In Ohio, residential electricity bills are projected to average $800 a month this summer, a 17 percent increase. ^[10]

Instead of working to lower those costs, the Trump administration is attacking the very clean energy generation that could help meet the state’s record electricity demand and forcing aging coal plants to stay open long after their scheduled closure. — Francesca Hsie

The administration's response has been to force the grid in the opposite direction. The Department of Energy issued at least 74 emergency orders to block the closure of aging coal plants, citing record electricity demand of 4.10 trillion kilowatt-hours driven by data centers, manufacturing, and electrification. ^[11] Trump also signed an executive order to quadruple nuclear capacity to 400 gigawatts by 2050. ^[12] The shield is being built with one hand while the other hand taxes its materials. The third lever is the war. Thirteen consecutive nights of US airstrikes after the June 17 ceasefire collapsed, Iran's closure of the Strait of Hormuz, and Brent crude pushing toward $100 a barrel have sent gasoline above $4 a gallon. ^[13] Mortgage rates have climbed in lockstep with each escalation, reaching 6.58 percent on the 30-year fixed by late July. ^[14]

The tug-of-war between inflation and the renewed conflict between the U.S. and Iran is reflected in today's rates, as higher oil prices raise concerns that elevated energy costs could filter into future inflation readings. — Jeff DerGurahian

The administration knows the war is driving the consumer costs it is trying to shield voters from. In early June, it temporarily reduced tariffs from 25 percent to 15 percent on agricultural and industrial equipment, explicitly citing the Strait of Hormuz blockage as raising diesel and fertilizer costs for farmers. ^[15]

In my judgment, this modification appropriately accounts for these products’ roles in productive economic activity in the United States and accounts for recent circumstances affecting the relevant industries and services that use these products. — Donald Trump

The concession is the tell. The administration does not dispute the causal chain from Hormuz to diesel to farm costs. It simply exempted one constituency from the tariff wall while leaving the wall in place for everyone else — and while continuing the military operations that keep Hormuz closed. Nobel economist Joseph Stiglitz connected the three forces in March, warning of high stagflation risk. ^[16]

The risk of stagflation seems to be quite high for the US. — Joseph E. Stiglitz

If you look at the rest of the stock market, it’s just languishing. — Joseph E. Stiglitz

The circuit is now fully visible. The president wages a war that closes the Strait of Hormuz, sending oil and gasoline prices upward and inflation with them. He proposes a gas-tax holiday to shield voters from the price at the pump, while telling reporters he does not think about their financial situation. He imposes tariffs on more than 80 countries — including on the Chinese solar panels needed to expand the grid — to pay for an economic program whose centerpiece is a non-binding pledge to contain the electricity costs those same tariffs inflate. He orders coal plants kept open and nuclear capacity quadrupled to meet the demand of an AI buildout he has declared a national security imperative, while the tariffs he calls an engine of growth raise the cost of every transformer, every panel, every mile of transmission line the buildout requires. ^[17] The mechanism does not need an external adversary to fail. It is already failing from the inside, each lever pulling against the next, the president's own hand on every one.