Couple that with last week’s Supreme Court decision striking down the emergency tariffs that were a centerpiece of Trump’s economic agenda, and the uncertainty that has characterized the American economic outlook since Trump returned to power seems only to have deepened.
Trump’s signature economic policies have run the gamut, often overlapping with his foreign policy and “America First” political agenda. They have included tax cuts to fuel spending and economic growth; tariffs to raise government revenue, reduce U.S. dependence on imports and bolster domestic manufacturing; an immigration crackdown that was also framed as a boon for American jobseekers and a path to better housing affordability; and a broad push to deregulate industries including energy and banking.
Here is a look at where some key measures of the $30 trillion U.S. economy stand as the second year of Trump’s second term gets under way.
GDP GROWTH BEATS EXPECTATIONS
The U.S. economy began last year by shrinking as businesses sought to beat impending tariffs by front-loading their imports. Economic growth ended the year on a slower note, largely due to the record-long government shutdown that temporarily reduced government spending. But in between, growth charged ahead at an expectations-beating pace, and this year the tailwinds from the tax cuts in Trump’s One Big Beautiful Bill are expected to bolster growth further, all else equal. Investment in artificial intelligence has driven some of the growth, but robust consumer spending has also been key.
TARIFF INCOME AND TRADE DEFICIT
Tariffs have been a central part of Trump’s economic policies from the beginning. Indeed, even before he was inaugurated, businesses moved to speed up imports to try to get ahead of the levies, temporarily deepening the U.S. trade deficit that Trump had said his tariffs were designed to reduce. Analysts say that over time, tariffs may narrow the gap between imports and exports that Trump sees as a measure of U.S. economic strength, but so far that has not happened. The Supreme Court’s ruling invalidated Trump’s sweeping “emergency” global tariffs, but the Trump administration has already put on new 15% tariffs to partially replace the ones that have gone by the board and has vowed to use a range of authorities to make sure that revenue from import levies does not drop.
MANUFACTURING OUTPUT RISES, JOBS FALL
Despite the squeeze from Trump’s import tariffs and high borrowing costs, manufacturing has staged a comeback, helped by an ongoing boom in investments in artificial intelligence. The comeback may continue and broaden this year as Trump’s tax cuts take effect, analysts said.
But the recent increase in industrial output has not been accompanied by a renaissance of jobs in that sector.
Indeed, factory employment during Trump’s second presidential term has declined, frustrating his ambitions for aggressive changes to trade policy to bolster opportunities for U.S. manufacturing jobs.
BROADER JOB MARKET STASIS
Unemployment has ticked up, but remains low, measuring 4.3% in January. Monthly job gains, however, slowed last year to a trickle, with the 180,000 increase in employment for the entire year only slightly more than the 168,000 average monthly job gain in 2024. Analysts link the deceleration to Trump’s immigration crackdown, which reduced both the supply of and the demand for jobs. U.S. employers did add 130,000 jobs in January, though it is unclear if that healthy showing will continue.
INFLATION, AFFORDABILITY REMAIN CONCERNS
Inflation has cooled since the post-pandemic surge during President Joe Biden’s administration, but year-over-year prices by the measure the Federal Reserve tracks inflation actually was trending upward at the end of last year, and analysts expect that to continue to be the case for another few months until the effect of tariffs – at least the ones in place last year – rolls off. Trump has nominated former Fed Governor Kevin Warsh to take over from Jerome Powell as Fed chair in May, and financial markets are betting that by then inflation will have cooled and that Warsh in his new role will oversee a couple of interest-rate cuts starting in June. Rate cuts could also be motivated by further weakening in the labor market.
Overall affordability concerns remain central to American household worries. Late last year, Trump announced a few policies aimed at addressing the problem, but mortgage rates remain high and the housing supply in most of the country is short of what is needed to meet demand. This leaves the cost of home ownership increasingly out of reach for families whose incomes are not well above the median.
