Trump’s policies boosted growth but left trade gaps and hiring
A study by the German Economic Institute reveals conflicting signals about the U.S. economy during Donald Trump’s second term. Economic output has stayed robust, but hiring has weakened, price increases have exceeded the Federal Reserve’s goal, and trade imbalances have not narrowed as anticipated.
Trump’s economic strategy, which included tariffs and tax reductions, was designed to cut the trade gap, lure foreign capital, and revive manufacturing. However, foreign direct investment fell to $248 billion in 2025—a decline of 8.2% from 2024 and 18% below the 2015–2024 average. The August trade deficit for goods reached $130 billion, exceeding the same month in the prior year.
Inflation has remained a major challenge, partly because of higher energy prices linked to the U.S.-Israeli tensions with Iran. The Fed’s 2% inflation target has been surpassed for more than five years, while wage increases have lagged behind. Personal income grew only 0.2% in September, and real disposable income dropped 0.3%, reducing the personal savings rate to its lowest level since October 2022.
Labor market figures suggest broader difficulties beneath stable unemployment rates, which have held between 4.1% and 4.3% this year. The share of long-term unemployed workers rose to 27% in September, up from 18% in 2023, while labor force participation slipped to 61.8% from 62.6% in January 2025. Job creation has also slowed significantly: the U.S. economy added 2.5 million jobs in 2023 but only 2 million in 2024 and roughly 120,000 in 2025, partly due to tighter immigration rules and increased retirements.
The economy’s growth has not eased cost pressures for most Americans. Democrats have framed the upcoming midterm elections as a test of whether rising expenses for housing, food, and healthcare remain the public’s top concern. Representative Suzan DelBene stated that voters are frustrated with unfulfilled economic commitments, directly tying these struggles to Trump’s policies.
Trump’s team has pushed back, pointing to recent economic improvements. On Truth Social, he highlighted third-quarter GDP growth of 3.4%, driven by strong consumer spending, business investment, and a 21% increase in equipment purchases. The White House also cited tax cuts, lower prescription drug costs, and record median household income as major successes.
As the midterm elections near on November 3, the report fuels the debate over whether Trump’s economic approach has met its goals. The administration’s claims of a thriving economy clash with ongoing affordability challenges and signs of labor market softening.
