More than a year into US President Donald Trump’s second term, his macroeconomic policy changes have produced mixed results, with strong growth and a surge in tech investment on the one hand, but stalled job gains and persistent inflation concerns on the other.Uncertainty over the US economic outlook has deepened following the Supreme Court’s decision last week to strike down emergency tariffs that were a central feature of Trump’s economic agenda.
Trump’s policies include tax cuts, tariffs, immigration restrictions, and deregulation, which often overlap with his “America First” political platform and foreign policy stance.Here’s an overview of where key indicators of the $30 trillion US economy stand, Reuters reports.
GDP growth is better than expectations
The U.S. economy began last year with a contraction as businesses stepped up imports to get ahead of impending tariffs. Growth slowed again at the end of the year, partly due to the record-long government shutdown that temporarily cut public spending.However, in the meantime, economic growth exceeded expectations. Reuters reported that the tax cuts in Trump’s “One Big Beautiful Bill” are expected to further boost growth this year, all else being equal.Strong consumer spending as well as investment in artificial intelligence has been a key driver of expansion.
Tariffs, trade deficit and Supreme Court setback
Tariffs remain central to Trump’s economic strategy. Even before his inauguration, companies ramped up imports in anticipation of the levies, temporarily increasing the U.S. trade deficit — the very imbalance Trump’s tariff policy aimed to reduce, Reuters said.While analysts believe the tariffs could reduce the gap between imports and exports over time, Reuters said that has not happened so far.The Supreme Court’s decision invalidated Trump’s sweeping “emergency” global tariffs. However, the administration has already imposed new 15 percent tariffs to partially offset the repeal measures and has pledged to use other authorities to maintain revenue from import duties, Reuters reports.
Manufacturing output increases, but jobs decline
Reuters reported that US manufacturing output improved, supported by strong AI-related investment, despite pressure from import tariffs and higher borrowing costs.Analysts expect the recovery to continue and broaden this year as the tax cuts take effect.However, the output boom has not translated into employment growth. According to Reuters, 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.
The broader job market is showing signs of stagnation
Reuters said the unemployment rate rose but remained relatively low at 4.3 percent as of January.Monthly job gains slowed significantly last year, with total employment increasing by 180,000 for the full year – just slightly above the 168,000 average monthly gain recorded in 2024.Analysts cited by Reuters attributed the slowdown partly to Trump’s immigration crackdown, which reduced both labor supply and job demand. In January, employers added 130,000 jobs, although it is unclear whether the pace will continue.
Inflation and affordability remain key concerns
Reuters reported that inflation has moderated since a post-pandemic surge under former President Joe Biden, but year-on-year price growth, as measured by the Federal Reserve’s preferred gauge, was trending upward late last year.Analysts expect inflation pressures to persist over the next several months until the effects of the earlier tariffs fade.Trump has nominated former Federal Reserve governor Kevin Wersh to replace Jerome Powell as Fed chairman in May. Reuters said financial markets are betting that inflation will calm down by then and Wersch could oversee an interest rate cut starting in June. Rate cuts could also be due to labor market weakness.Despite economic growth, affordability concerns remain central to American households. According to Reuters, mortgage rates are still high and housing supply remains inadequate in much of the country, putting home ownership out of reach for many families whose incomes are not above average.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 clouding the outlook.
