Trump’s Economic Boasts: A Closer Look

Amidst his grandiloquent claims at Davos, President Trump boasted of an economic boom in the US. He asserted that the nation was “the hottest country anywhere in the world,” attributing this entirely to his leadership. But is this picture of economic success accurate?

The Reality Behind GDP Growth

US real GDP growth in Q3 2025 reached an annualised rate of 4.4%, a striking figure indeed. However, this is an annualised rate, implying the quarter-on-quarter increase was merely 1.1%. On a year-on-year basis, growth was a moderate 2.3%, up from 2.1% in Q2. This growth surge largely results from decreased imports due to Trump’s trade tariff hikes rather than a booming domestic economy.

Investment and Income Discrepancies

Investment growth, particularly in housing, slowed dramatically, with an annualised rate of just 1% in Q3. Business investment growth also shrunk from earlier highs. While GDP appeared buoyant, real gross domestic income (GDI), reflecting the actual income to workers and capitalists, grew at a mere 2.4% annual rate. Average incomes, measured by real personal disposable income, stalled during the same period, increasing only 1.5% year-on-year.

Inflation and Consumer Confidence

Contrary to Trump’s claim that “inflation has been defeated,” the official inflation rate stubbornly hovers at 2.7% year-on-year. The core personal consumption expenditure inflation rate, crucial to the Federal Reserve, is even higher at 2.8% year-on-year. Peterson Institute forecasts suggest this might climb to 4% a year by 2026.

Employment and Immigration

The economic narrative under Trump’s tariffs promised a renaissance in manufacturing jobs, yet the US saw a decline of 65,000 industrial jobs over the past year. Despite a decrease in immigrant numbers, sectors reliant on migrant labour, such as agriculture and healthcare, saw stagnant employment. Native-born workers have not filled these gaps, and unemployment has worsened for them, though it remained stable for foreign-born workers.

Corporate Profits and Productivity

Corporate profits have shown a marked increase in Q3 2025 but remain concentrated within tech, banking, and energy sectors. Despite a 4.9% rise in US labour productivity in Q3, productivity year-on-year was a modest 2.3%. The anticipated “AI productivity boom” hasn’t yet manifested in broader economic growth.

The Role of Fiscal Policies

Trump’s fiscal policies, including tax cuts for corporations and reductions in welfare programs, are predicted to benefit the wealthiest, with the Congressional Budget Office suggesting the poorest 40% will see income reductions. CBO Analysis illustrates this disparity starkly.

A Fragile Economic Picture

Despite headline figures, the US economy isn’t the roaring success described. Real economic gains remain elusive for many Americans, and looming economic threats could unravel these fragile achievements. Should the AI bubble burst, as some anticipate, the picture could worsen significantly.

Reposted from Michael’s blog.

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