In brief
Trump’s new administration pitches a booming economy—yet the numbers paint a mixed picture. While the US GDP is expanding at 2.2% and AI‑driven data‑centre investment hits new highs, inflation has climbed to 3.7% and is higher than the 3% start of his term. Job growth has slowed to about 34,000 positions a month—one‑third of the pace under Biden—while household incomes lag after tax cuts and subsidy expiries. Rising deficits and a 5% federal‑bond yield are driving mortgage rates to 7.4%, tightening housing affordability for many American families.
President Donald Trump has been flaunting what he calls the most robust economic performance in American history, touting higher incomes, lower inflation and a surge in employment.
But independent data shows a far less rosy portrait. The US GDP, a barometer of economic health, is growing at a respectable 2.2% annualised rate—solid but modest by G7 standards—and posted a 3.2% rise since the end of 2024, just before Trump’s return to office.
Tariffs and Inflation
Trump’s sweeping “Liberation Day” tariffs, introduced on 2 April 2025, originally shocked markets and were expected to dent growth. While the Federal Reserve and the International Monetary Fund (IMF) warned of a slowdown, the economy instead nudged ahead, surpassing IMF forecasts in the wake of the tariff launch. However, the tariffs have also fed domestic price pressures, with economists estimating that inflation would have stayed lower without them.
Inflation now sits at 3.7%—half the 9% peak under Biden in 2022, yet noticeably higher than the 3% rate he inherited in January 2025. Global shocks from the U.S.–Israel war and a clash in Iran have further tightened energy supplies, pushing diesel prices to a record high of $6.52 per gallon in September and squeezing grocery staples.
AI Spending and Economic Growth
American tech firms are pouring money into AI infrastructure, with the monthly outlay for data‑centre construction reaching $5 bn in August 2026—almost double the rate that marked the start of Trump’s second term. This surge in AI investment underpins part of the GDP gain, but the economy could falter if the funding dries up.
Employment and Wages
Where Obama and Biden ran ahead, Trump’s job creation pace has slowed. Only about 34,000 new jobs are added on average each month, a figure starkly below the 122,000 monthly additions during the final year of Biden’s presidency. Manufacturing employment is slightly down, while the overall unemployment rate hovers at 4.2%—similar to early 2025 levels.
Household incomes have risen, with the median after‑inflation income climbing 2.6% in 2025 to $87,460. Yet the Institute on Taxation and Economic Policy (ITEP) argues that tax cuts, the lapse of subsidies that had lowered health‑insurance costs, and price hikes—including those from tariffs and the Iran conflict—have left the middle and lower quintiles roughly $1,700 and $750 behind, respectively. Conversely, the top 1% appears to gain about $12,560 thanks to tax relief.
Deficits, Borrowing Costs and Mortgage Rates
The federal deficit has surged to $2 trillion for the year ending September 2026—about 6% of GDP—and is projected to climb above 8% by 2030. This rising debt feeds higher interest rates on government bonds, pushing the 10‑year yield above 5% for the first time since 2007.
The cost of borrowing has a direct knock‑on effect on consumer finance; the average 30‑year mortgage rate is now 7.4%, up from 6.9% when Trump returned to the White House. Higher rates dampen housing affordability, trapping owners who cornered low rates a few years ago and discouraging new buyers.
In sum, Trump’s narrative of an unstoppable economy races ahead of the data—GDP surging, AI growth booming and job creation modest—but inflation, deficits, and higher borrowing costs inject caution into the story for everyday Americans.
