President Donald Trump is veering sharply left on several key economic policies. Alarmed by voter frustration over affordability, he appears to be panicking. In doing so, he is making a fundamental mistake: embracing price controls. History shows that price fixing does not reduce costs. It makes economic problems worse.
Trump has proposed banning institutions from owning residential rental properties. He has flirted with using lawfare to pressure the Federal Reserve Board to cut interest rates even as inflation remains well above the Fed’s 2% target. And last Friday, he called for a one-year cap of 10% on credit card interest rates, a long-standing progressive idea championed by populists in both parties, including Sen. Elizabeth Warren (D-MA).
Trump has said the cap would take effect on Jan. 20, 2026. But how he intends to implement such a policy is unclear. No legislation grants the president authority to impose price controls on consumer credit. Congress has repeatedly declined to enact such proposals. Trump may attempt to proceed by executive order, but federal courts are increasingly skeptical of his executive overreach. They would likely strike it down.
The stock market immediately registered its opinion about Trump’s proposal to cap credit card interest rates. Banks and credit card stocks fell sharply. The financial sector was the worst-performing group on Tuesday of this week. The market knows that price fixing does not work. Credit card interest rates currently average above 20%, according to Fed data.
Borrowers with strong credit pay much less, while those with weaker credit pay substantially more. This is not arbitrary. Credit card lending is unsecured. There is no collateral. When borrowers default, issuers often lose the full balance. Lower-income households default at higher rates, forcing lenders to price for risk. Economic history delivers a clear verdict: capping interest rates backfires.
A government-imposed interest rate ceiling would cut off access to credit for millions of lower-income households that rely on credit cards to smooth consumption and manage emergencies. JPMorgan Chase, arguably the nation’s most important financial institution, has already warned that such a cap would force it to stop issuing cards to many lower-income customers. Importantly, a 10% cap would price 80% of households out of the credit card market.
Where would those families turn? Their remaining options would be payday lenders, pawn shops, “buy now, pay later” schemes, offshore fintech firms, or loan sharks. These alternatives charge far higher rates and, in some cases, use coercive or even violent collection methods. Do Trump and his populist allies really want to expand the market for the bottom-feeders of the credit industry?
What is most disappointing about Trump’s leftward turn on credit card rate caps, institutional ownership of housing, and pressure on the Fed is that each policy would make affordability worse over time. The lesson is not theoretical. In the early 1970s, former President Richard Nixon imposed sweeping price controls. The result was predictable: shortages, distortions, and economic stagnation. Limiting institutional investment in housing would similarly reduce supply, lower quality, and push rents higher, making shelter less affordable, not more.
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As for using the courts or political pressure to force the Fed to cut rates while inflation is elevated, the outcome would be higher long-term interest rates, weaker business investment, a softer economy, and almost certainly a sharp decline in equity markets. Price fixing never works. Free-market capitalism is the answer.
If Trump is serious about affordability, the answer is not control and political coercion. It is growth. A strong economy that delivers sustained real wage gains is the only durable solution. A growing economy makes life more affordable for everyone.
James Rogan is a former foreign service officer who later worked in finance and law for 30 years. He writes a daily note on markets, politics, and society.
