Trump’s Self-inflicted Policy Shocks Blunt His ‘roaring’ Economy

President Trump stood before Congress on Tuesday and declared the US economy was “roaring like never before”. In his State of the Union speech, he boasted he’d slain Joe Biden’s inflation, delivered “tremendous growth” and used new tariffs to bring peace, revenue and redress for countries’ unfair trade practices.

Reality is both more impressive and more sobering. America’s economy has certainly been resilient this past year. But it had to be, faced with the policy shocks from this president.

American GDP grew by 2.2 per cent in 2025. That’s reasonable, but below the 2.8 per cent recorded in 2024. That annual figure also hides a quarterly rollercoaster. Firms bought up imports early to beat anticipated tariffs, depressing domestic output measures, before the reversal flattered the numbers mid-year. Look through the noise and the economy is chugging along. Steady, but not surging.

Nor has inflation been fully vanquished. The Federal Reserve’s preferred measure sits at 2.9 per cent, almost 50 per cent above its 2 per cent target. Trump’s policies haven’t helped, as tariffs have squeezed supply and big budget deficits have made the Federal Reserve’s job more difficult. His economic approval has thus slid even as real wages rose in 2025. For American voters, prices are now the key barometer of economic health. And they hate that groceries, electricity and cars are over 30 per cent pricier than five years ago.

Trump over-promised in his election campaign by saying he’d slash prices. Four fifths of his voters told pollsters they believed him and are now disillusioned that prices haven’t fallen. Faced with poor polling, the president is scrambling for “affordability” measures: interest-rate caps on credit cards, bans on institutional investors buying homes, and drug price controls. All are a sharp break from Republican economic orthodoxy.

Indeed, Trump’s second term has shocked in its departures from traditional conservative economics. Yes, a major tax bill last year entrenched Trump’s important 2017 tax cuts while adding some new, less justifiable giveaways. But Trump’s administration has engaged in rampant state corporatism too, including taking government equity stakes in 12 companies and counting.

It’s easy to overstate the damage of these actions, which corrupt economies slowly by politicising business decisions. It’s also easy to overplay a president’s influence on a $31.5 trillion economy in general. The US remains at the frontier of artificial intelligence, and economists such as Erik Brynjolfsson see early signs of a productivity take-off. Trump’s instinctive opposition to economic regulation — including on AI and fossil-fuel development — leaves the country well placed to benefit. As a libertarian, there have been other policy moves to welcome too, such as decimating (in the definitional sense) the federal government workforce.

But the broad new tariffs have been a major headwind. Supposedly meant to shrink the trade deficit and reshore manufacturing jobs, they have delivered neither. America’s trade deficit in goods grew overall in 2025, while manufacturing employment fell by 83,000 workers as the effective tariff rate hit its highest level since 1932. Taxing key inputs to production, disrupting supply chains and creating vast legal uncertainty about where these taxes will settle has, perhaps unsurprisingly, not yet been a recipe for an industrial renaissance.

Last week’s Supreme Court ruling overturning Trump’s use of an emergency statute to justify most tariffs might have eased that investment-crushing uncertainty. Yet on Tuesday the president again pledged to reconstruct the protectionism using executive power. Businesses, therefore, now face fresh unknowns, including where legal fights for refunds on past tariffs deemed illegal will end up, and waiting for courts to clarify the legality of new impositions.

An honest ledger for Trump’s economy, then, would conclude: growth down a notch, inflation still elevated, trade policy self-destructive, and a president now reaching for price controls as the inflation issue that won him the election batters his own popularity. The US economy is certainly no disaster. But it has not seen the policy “transformation” Trump describes.