President Donald Trump and his GOP allies in Congress sold their "Big Beautiful Bill," cutting taxes on the rich and slashing funding for Medicaid, in part by arguing that the handful of tax cuts that affect lower-income workers, like the temporary elimination of the tax on tips, would provide relief from inflation for consumers.
But Trump's war with Iran, and the shutdown of the Strait of Hormuz, has already more than wiped out any of those hypothetical savings, economic strategist Henrietta Treyz told MS NOW's Katy Tur on Monday morning.
"Henrietta, you just heard ... about maybe oil getting over $150 a barrel if this is still going on over the summer," said Tur. "I mean, it's already pretty priced in for how long the oil prices as we see them now, and the gas prices for how much longer will these gas prices be as high as they currently are?"
"Well, right now we're off the highs. We're at $102 [per barrel]," said Treyz. "But just for anybody watching at home, I mean, you wiped out your entire benefit of the One Big Beautiful Bill and the [no tax on] overtime and tips that President Trump was talking about in the Oval Office just a minute ago, about $19 ago."
"So not only are we escalating, the ships are not flowing through the Strait at anywhere near the rates that they were before the bombing started," said Treyz. "The president has suggested that as many as 35 ships have gotten through. That's cool, but we used to have 130 ships per day, and the reports are coming in that Chinese ships are being turned around and are not being permitted access through the Strait."
"So what happens?" she continued. "The way that I look at it is the gas is your first indicator, what comes next is shipping. And by that I mean transit across America on trucks that you see for Amazon or Target or Walmart. Those are all now more expensive. Diesel prices are well above $5 at this point nationwide. What happens after that is your food gets more expensive. Everything that you're buying on the shelves at Walmart that got delivered from those trucks coming through, paying diesel prices, they came off of the, of the Strait and came out of oil and gas prices that are 21 percent higher and leading directly to inflation."
The bottom line, Treyz said, is that "Oxford Economics is anticipating that inflation will hit 4 percent. And that means no Fed rate cuts. That means Fed rate hikes. Your mortgage is more expensive. It's harder to create a new business. You're talking about a seize-up. Structurally, gas is just the first thing that we see."