Trump’s Tariffs Boosted 2026 COLA – Why Your Wallet Won’t Feel Relief
Written by
Vance Cariaga
Edited by
Angela Corry
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Tariffs imposed by President Donald Trump contributed to higher prices in 2025, which in turn contributed to a higher Social Security cost-of-living adjustment for 2026. Whether the COLA is enough to offset overall inflation is up for debate.
According to Federal Reserve data, the Personal Consumption Expenditures (PCE)-weighted average effect of the tariffs on prices was 0.87% during the first eight months of 2025. Partly because of the tariff impact, the 2026 COLA was approved at 2.8% — above the previous year’s COLA of 2.5%.
The annual COLA is designed to give Social Security beneficiaries a monthly raise to help them deal with higher prices. But many beneficiaries won’t feel much relief in their wallets. Here’s a look at why.
Outdated COLA Formula
Even before the Trump tariffs pushed prices higher, Social Security’s COLA formula came under fire from a wide range of critics. The formula is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which doesn’t account for senior-specific expenses such as increases in the Medicare Part B premium.
“For years, Social Security’s cost-of-living adjustment has failed to keep up with the real cost increases seniors face,” Shannon Benton, executive director of The Senior Citizens League, told GOBankingRates. “While the COLA is meant to protect beneficiaries from inflation, it relies on an inflation formula that does not accurately reflect how older Americans spend their money.”
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One big problem is that seniors spend a higher share of their income on housing, prescription drugs, utilities and health care than other age groups.
Housing, Medical Care Inflation Outpace Overall Inflation
Because housing and medical care represent such a big expense for seniors, it helps to compare those inflation rates with overall inflation to determine the COLA’s effectiveness.
Here’s a Motley Fool breakdown showing how the average CPI-W inflation rate compared with housing and medical care during the 2025 third quarter, which is when this year’s COLA was calculated:
- Overall CPI-W inflation: 2.8%
- Housing inflation: 3.9%
- Medical care inflation: 3.6%.
No Relief This Year
This year’s latest inflation numbers continue to reflect a challenging environment for seniors. Data from the U.S. Bureau of Labor Statistics found that while overall inflation rose 2.3% year-over-year in February, housing inflation came in at 3.3% and medical care inflation came in at 3.4%.
Seniors who depend on Medicare will find it particularly hard to make ends meet, according to Chad Cummings, a CPA and attorney at Cummings & Cummings Law who previously worked in finance and tax.
“The 2.8% Social Security COLA adds about $56 per month to the average benefit, but the Medicare Part B premium increase of almost $18 per month absorbs a third of that gain before a retiree buys a single item,” he told GOBankingRates.
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