President Donald Trump has put the US economy on a bad path.
Since coming to power, he has:
- Installed heavy and constant taxation on imports, thereby increasing consumer costs and trade uncertainty.
- It is made global energy crisis that has raised the Americans gas price while threatening to plunge world in recession.
And yet, the American economy marches on like a zombie shot in the gut, damaged but undeterred by the bullets it has fired.
US GDP rose rate of 2 percent per year in the first quarter of 2026 and a pace of 2.1 percent in 2025, which is higher than the economic growth. many other developed economies. Meanwhile, the unemployment rate in the United States remains at a historic low of 4.3 percent. And wages rose faster than inflation throughout the year 2025.
To be sure, economic indicators are not all sunshine. Last month, for the first time since 2023, real wages in the United States fell inflation for the year reached 3.8 percent.
However, if you told an economist in January 2025 that the new US president would start a global trade war, restrict legal immigration, and start a conflict with Iran that indefinitely closed the Strait of Hormuz – and then asked that economist to predict what the US economy would look like in May 2026 – they would surely be more worried than someone living right now. through.
Others will look at all this and to conclude that Trump’s trade, immigration, and foreign policies were not costly at all.
Another interpretation, however, is that Trump could have managed the economy of the past, if only he had refrained from raising import prices, reducing labor force growth, and starting a war of choice near the aorta of the global energy market.
One might call this “We had a good thing” account of the economic performance of the Trump era, after Mike Ehrmantraut very memed lashing out at notorious drug lord Walter White in the season finale of the AMC series Breaking Bad.
And many recent reports indicate that this story is correct.
How Trump slowed US economic growth
To understand how Trump’s worst policies have affected the economy, one needs a sense of what America’s economic life would be like today in the absence of those measures.
Of course, this is impossible to know for sure; we don’t have a time machine or access to a multidimensional wormhole. But economists have done their best to paint what growth and inflation might look like in that alternative world.
Let’s start with GDP. According to Peterson Institute for International Economics, The tax reduced America’s growth rate in 2025 by 0.23 percent. But if The Economist notesthis figure likely underestimates the full impact of Trump’s tariffs, as it does not take into account their impact on investor uncertainty.
When a business decides to invest capital in a new project, it must weigh the risk that unforeseen circumstances will reduce the return on their investment. For this reason, according to conventional wisdom, the more volatile the market and policy environment, the more likely companies are to hoard their funds.
And outside of the growing AI sector, American businesses have actually pulled back on investment. As the Economist observes, excluding the categories related to artificial intelligence, business investment. it fell at a 3 percent annual rate over the past four quarters — after rising at an average rate of 5 percent over the past decade. This collapse in non-AI investment has reduced roughly 0.4 percent of GDP growth to 2025, according to the journal’s analysis.
Meanwhile, without Trump’s immigration policies, the American workforce it would be bigger – and thus, the economic output of the United States would be greater. According to a Brookings Institution reportLast year’s decline in immigration cut up to 0.26 percent from US GDP.
Together, these analyzes show that economic growth would have been higher than 0.9 percent last year, had it not been for Trump’s trade and immigration policies.
How much Trump’s war with Iran reduces growth in 2026 is unclear. It really depends on the direction of the conflict. But many analysts believe it has reduced output slightly. Meanwhile, Trump’s tax and immigration policies continue to weigh on the economy.
Trump has created higher prices
Data on inflation tells a similar story. Trump’s tariffs have increased import costs for businesses that have passed some of that burden on to consumers. As a result, prices are rising faster in the United States than would otherwise be the case, according to a recent report from the Dallas Federal Reserve.
In the analysis, the bank plots the core US inflation rate over time and compares this to that rate would be has been in the absence of all tax effects. The two lines diverge sharply after “Emancipation Day,” when the president slapped heavy tariffs on nearly all of America’s trading partners (these rates were later paid by the administration and decision of the Supreme Courtbut many remain above their pre-Trump levels).
Based on the Fed’s calculations, as of this March, America’s core inflation rate would have been just 2.3 percent — instead of 3.2 percent — in the absence of Trump’s tariffs.
And this does not take into account the price effects of the Iran War. A different paper from the Federal Reserve economists estimate that a three-month closure of the Strait of Hormuz would add 0.35 points to inflation. If the waterway remains closed for six months, that figure jumps to 0.79 points. After 9 months, it gets 1.47 points.
In other words, without Trump’s tariffs and warming, America’s inflation rate could be more than a point lower today (and not far from the Fed’s 2 percent target).
Moreover, in that alternative world of America, Americans will not only enjoy lower prices but also lower borrowing costs. As it is, persistent inflation has hindered the Fed’s willingness to cut benchmark interest rates while encouraging private lenders to offer less generous terms. Since the War with Iran began at the end of February, credit standards they have gone up.
For all this, the American economy is still growing. And inflation is not very high by historical standards, although it is still elevated.
However, the stability of the economy is largely due to complex conditions separated from trade, immigration and Trump’s foreign policies. AI boom is stimulate greater investment in data centerssoftware, and information processing technology, while also raising the value of the stock – and, therefore, consumer spending wealthy and upper middle class households. Meanwhile, inflation was about to subside when Trump took office, as supply chains continued to normalize after the post-COVID shock.
In short, like him once he did early in lifeTrump has ruined the fortune inheritance.
