More than a year into US President Donald Trump’s second term, his sweeping economic policy changes have produced a mixed outcome, with strong growth and a tech investment boom on one hand, but stalled job gains and persistent inflation concerns on the other.
The uncertainty surrounding the US economic outlook has deepened further following last week’s Supreme Court decision striking down the emergency tariffs that were a central feature of Trump’s economic agenda.
Trump’s policies have spanned tax cuts, tariffs, immigration restrictions and deregulation, often overlapping with his “America First” political platform and foreign policy stance.
Here is an overview of where key indicators of the $30 trillion US economy stand, as per a Reuters report.
GDP growth beats expectations
The US economy started last year with a contraction as businesses front-loaded imports to get ahead of impending tariffs.
Growth slowed again toward the end of the year, partly due to a record-long government shutdown that temporarily curtailed public spending.
However, in between, economic growth exceeded expectations. Reuters reported that tailwinds from tax cuts in Trump’s “One Big Beautiful Bill” are expected to further bolster growth this year, all else equal.
Investment in artificial intelligence has been a major driver of expansion, alongside robust consumer spending.
Tariffs, trade deficit and Supreme Court setback
Tariffs have remained central to Trump’s economic strategy. Even before his inauguration, companies accelerated imports in anticipation of levies, temporarily widening the US trade deficit — the very imbalance Trump’s tariff policy aimed to narrow, Reuters said.
While analysts believe tariffs may reduce the gap between imports and exports over time, Reuters noted that so far this has not materialised.
The Supreme Court’s ruling invalidated Trump’s sweeping “emergency” global tariffs. However, the administration has already imposed new 15 per cent tariffs to partially offset the scrapped measures and has pledged to use other authorities to maintain revenue from import levies, reported Reuters.
Manufacturing output rises, but jobs decline
Reuters reported that US manufacturing output has rebounded, supported by strong AI-related investment and despite the pressure of import tariffs and high borrowing costs.
Analysts expect the recovery to continue and broaden this year as tax cuts take effect.
However, the rebound in output has not translated into job growth. Factory employment has declined during Trump’s second term, undermining one of his stated goals of reviving US manufacturing employment through aggressive trade policy changes, according to Reuters.
Broader job market shows signs of stasis
The unemployment rate has edged up but remains relatively low at 4.3 per cent as of January, Reuters said.
Monthly job gains slowed significantly last year, with total employment rising by 180,000 for the entire year — only slightly above the 168,000 average monthly gain recorded in 2024.
Analysts cited by Reuters attribute the slowdown partly to Trump’s immigration crackdown, which reduced both labour supply and job demand. In January, employers added 130,000 jobs, though it remains unclear whether that pace will continue.
Inflation and affordability remain key concerns
Inflation has eased since the post-pandemic surge under former President Joe Biden, but year-over-year price growth, measured by the Federal Reserve’s preferred gauge, was trending upward at the end of last year, Reuters reported.
Analysts expect inflationary pressures to persist for several more months until the effects of earlier tariffs fade.
Trump has nominated former Federal Reserve Governor Kevin Warsh to succeed Jerome Powell as Fed chair in May.
Financial markets are betting that inflation will have cooled by then and that Warsh could oversee interest rate cuts starting in June, Reuters said. Rate reductions may also be driven by further labour market weakness.
Despite economic growth, affordability concerns remain central for American households. Mortgage rates are still elevated and housing supply remains insufficient in much of the country, keeping home ownership out of reach for many families whose incomes are not well above the median, as per Reuters.
Overall, more than a year into Trump’s second term, the US economy reflects a combination of solid growth momentum and persistent structural challenges, with trade policy uncertainty continuing to cloud the outlook.
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