McDonald’s Bid to Lower Prices Has a Trump Problem

McDonald’s is facing renewed challenges that could undermine its aim to lower prices in 2025—and one of their biggest fans might be to blame.

Donald Trump has long frequented the Golden Arches. “I love McDonald’s,” he said during campaign stop at a franchise in suburban Philadelphia in October.

A month later, he was pictured tucking into a McDonald’s meal aboard Trump Force One, next to his son Donald Trump Jr, billionaire and incoming head of the Department of Government Efficiency, Elon Musk, and Trump’s nominee for Health Secretary, Robert F. Kennedy.

But the Trumps—and everyone else—may soon find they are having to dig even deeper into their pockets to get their fast-food fix, in part due to policies proposed by the President-elect.

Trump has vowed that “inflation will vanish completely” when he returns to the White House. But he said last month he will impose an additional 10 percent tariff on Chinese products entering the U.S., as well as a 25 percent tariff on goods from Canada and Mexico, when he does.

By raising the cost of imported goods, Trump risks stoking inflation, according to experts. Analysis by Goldman Sachs estimated tariffs would raise consumer prices inflation by 1 percent, if carried through. They would also hurt profit margins for U.S. companies, while increasing the threat of retaliatory tariffs by other countries, the bank projected.

This could also spark a trade war with China, which could hit McDonald’s expansion plans there. The Chinese embassy in Washington told Newsweek that “no one will win” in a trade war between China and the U.S.

Karoline Leavitt, the spokeswoman for the Trump-Vance Transition team, told Newsweek: “In his first term, President Trump instituted tariffs against China that created jobs, spurred investment, and resulted in no inflation. President Trump will work quickly to fix and restore an economy that puts American workers by re-shoring American jobs, lowering inflation, raising real wages, lowering taxes, cutting regulations, and unshackling American energy.”

Newsweek has contacted McDonald’s via email for comment.

Inflation Could Wreck ‘McValue’ Initiative

According to analysis by Jason Miller, Professor of Supply Chain Management at Michigan State University, tariffs would hurt fast-food companies that have already been hit by rapid-rising inflation. Since 2019, prices at limited service restaurants like McDonald’s have soared more than 30 percent, he told Newsweek. This is down to higher wages and increased cost of manufacturing food, Miller added.

“Average hourly earnings of frontline workers in this industry are up over 30 percent from 2019. Animal (except poultry) manufacturing plants are receiving over 40 percent more for products than on the eve of the pandemic, with no evidence that prices will trend down,” he said.

“The price other snack food manufacturing firms are receiving for their products are also up 40 percent from before the pandemic. The same figure holds for paperboard containers and packaging. This helps explain the elevated prices due to cost pass-through.”

McDonald’s has already raised prices in response to the spike in post-pandemic inflation, with the average cost of menu items up 40 percent over the past five years, according to the company.

The average price of a Big Mac in the U.S. is 21 percent higher than it was in 2019, up from $4.39 to $5.29, while the price of a 10-piece McNuggets meal is up 28 percent since then and medium french fries are 44 percent more expensive.

CEO Chris Kempczinski has already warned investors that as a result of the price hikes, fewer “low-income consumers”—by which he means households earning $45,000 a year or less—are showing up for meals at McDonald’s. About 28 percent of US households earn less than $45,000 a year, according to the latest Census Bureau data. That accounts for more than 90 million Americans.

At the same time, the company’s operating margin climbed to 46 percent last year from 43 percent in 2019, Bloomberg reported, citing McDonald’s financial statements. This suggests that prices at McDonald’s grew faster than its input costs. But McDonald’s president Joe Erlinger has insisted reports that McDonald’s has raised prices beyond the rate of inflation are “inaccurate.”

To attract more customers, McDonald’s is launching its new “McValue” line next year, which will include current favorites like the $5 Meal Deal, exclusive in-app offers, and local food and drink deals. It will also include a new Buy One, Add One for $1 offer on popular items such as a double cheeseburger; McChicken sandwich; 6-piece chicken nuggets and small fries; or breakfast options of a Sausage McMuffin, sausage biscuit or sausage burrito and a hash brown.

“When it comes to value, we know there’s no one-size-fits-all. We’ve worked closely with our franchisees to create a new platform that will let our customers define value on their own terms,” Erlinger said. “From deals on their personal go-to order to universal favorites like the $5 Meal Deal, we’re excited to give fans more ways to save every time they visit one of our restaurants.”

But rising costs for labor and supplies may limit the effectiveness of the McValue initiative, especially if Trump’s tariffs see inflation soar again. “Any shock that further increases prices in key input categories for McDonald’s certainly won’t be helpful,” Miller told Newsweek.

“The ‘Buy One, Get One for $1’ promotion and extension of the $5 value meal deal are not just about increasing revenue, but also about attempting to lure back in customers who have moved away from the brand over the last year,” Alex Beene, a financial literacy instructor at the University of Tennessee at Martin said in a previous interview with Newsweek. “In essence, the deal is more of a marketing attempt than it is trying to save customers’ money, even though it should do just that.”

China Threat to McDonald’s

While McDonald’s could face tougher times on the home front, a U.S. tariff war with China could also limit the fast-food chain’s international ambitions. McDonald’s operates 5,903 stores in China and is aiming to have 10,000 outlets open in the country by 2028.

“About the issue of U.S. tariffs on China, China believes that China-U.S. economic and trade cooperation is mutually beneficial in nature. No one will win a trade war or a tariff war,” the Chinese embassy in Washington said in a statement.

And they may be correct. Analysts from the National Institute of Economic and Social Research estimated that if Trump imposed his proposed tariffs and other nations retaliated in kind, the U.S. economy would be 4 percent smaller and China’s 2.1 percent smaller in five years’ time.

Meanwhile, Xie Feng, China’s ambassador to the U.S., recently warned that some of the US’s best-known companies such as McDonald’s and Starbucks would suffer as a result of a trade war given their extensive businesses in China.

“Tariff war, trade war, tech war or industrial war would produce no winner. Protectionism only locks one in backwardness and costs them the future,” Feng said.

“Among the new outlets of McDonald’s opened last year, about 60 percent were in China. And Starbucks is running more than 1,000 stores in Shanghai, topping the world. Both are success stories of mutual benefit. The more such success stories of mutual benefit, the better.”

Neil Thomas, fellow at the Asia Society Policy Institute, told Newsweek that Beijing may “retaliate against high-profile American companies such as McDonald’s” if the U.S. President-elect imposes tariffs in order to “send a warning to the Trump administration against further escalation of its China trade war.”

However, Thomas added this is unlikely to result in Beijing forcing McDonald’s to shut down any of its outlets in China since this “would have a chilling effect on international business sentiment, at a time when [Chinese President Xi Jinping] is trying to preserve a fragile economic recovery.”