While tariff pressures have abated since President Donald Trump issued a 90-day pause on hikes, with the notable exception of China, Social Security researchers are pointing to potential cost-of-living issues for recipients in the coming months.
The reason is that while inflation rates have fallen in 2025, they could rise again in the second half of the year and in 2026 if higher tariffs put upward pressure on prices.
On the upside, the U.S. consumer price index (CPI) declined by a seasonally adjusted 0.1 percent in March, easing the 12-month inflation rate to 2.4 percent, down from 2.8 percent in February. However, some economists say that keeping a 10 percent blanket levy on global imports and leaving just a 90-day negotiation period on higher tariff rates could trigger yet another bout of inflation.
“Today’s softer than expected CPI release feels backward-looking given the large changes to trade policy seen in recent days,” said Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management, in a research note. “Going forward, the Fed will likely face a difficult trade-off as tariff-driven price increases start to feed through to the inflation data and activity remains soft.”
The direction the Federal Reserve takes with interest rates has a direct bearing on Social Security Cost-of-Living Adjustment (COLA) rates. Last October, the SSA announced a robust 2.5 percent increase in the cost-of-living adjustment for Social Security recipients. That averages out to a $50 per month payment hike for approximately 68 million program recipients, the SSA reported. The 2024’s COLA hike was even higher, at 3.2 percent, which was closer to the COLA average from 2020 to 2024.
Based on current U.S. inflation datasets and CPI trends, the 2026 COLA calculation may not be as high. The U.S. government’s core inflation gauge stands at a four-year low, and the Senior Citizens League, a nonpartisan organization that tracks COLA rates, said the 2026 number looks set to land at around 2.3 percent, which would drive Social Security COLA increases down next year.
That would be bad news for America’s seniors, who typically live on a fixed income in retirement.
“Placing broad-based tariffs on goods from numerous countries could have a profoundly negative impact on the daily lives of seniors, including the costs of drugs and medical equipment that many seniors rely on,” said Senior Citizens League executive director Shannon Benton in an April 10 statement. “It’s also highly likely that import taxes will keep food prices high, increase auto insurance costs, and contribute to higher inflation, among other effects.”
Prescription drug costs could rise significantly higher than estimated COLA rates. Data from the Journal of the American Medical Association suggests that higher import levies could increase costs for 400 drugs from Canada alone. Add tariff-impacted countries like China, India, and Mexico to that list, and U.S. seniors may be in for a jolt when buying prescription drugs.
According to the National Council on Aging (NCOA), American seniors’ true cost of living continues to outpace annual Social Security COLA hikes.
“The 2.5 percent COLA for Social Security benefits in 2025 is nowhere near enough to allow older adults to afford their true cost of living,” said Ramsey Alwin, president and CEO of the NCOA, in a statement. “Since COLA is based on the Consumer Price Index for urban wage earners and clerical workers, it is already inadequate because older adults have different needs and higher health care expenses.”
Alwin pointed to the poverty rate for those aged 65 and over, which stood at 14 percent in 2023. “Our research with the LeadingAge LTSS Center @ UMass Boston shows that about half (or a little over 27 million) of households with adults age 60 and older have an average income below what they need to cover their basic needs. Social Security must keep up with this reality.”
That task may be harder to tackle in a highly volatile tariff environment, and is unlikely to be resolved soon.
