US economy
How the economy developed under Trump
Falling prices, strong growth, more jobs or a falling trade deficit: Donald Trump made many promises at his inauguration. Could he hold her?
“The golden age for America begins right now.” Donald Trump promised nothing less than this for the American economy exactly a year ago, after he had just been sworn in as the 47th President of the USA. If you look at the development of the US stock markets since January 20, 2025, you might think that he was right.
During this period, the leading index Dow Jones climbed by over 14 percent, the market-wide S&P 500 by almost 17 percent and the technology index Nasdaq 100 by more than 21 percent. But do the US stock markets actually represent the American economy?
Growth driven primarily by the AI boom
“If we look at developments on Wall Street, we see that the indices are primarily driven by the large AI technology companies,” says Stefan Riße, capital market strategist at asset management Acatis. That’s just a part of the US economy, but it has a lot of dominance on the stock market. “The real economy has not yet benefited that much.”
“Trump is incredibly lucky that the tech industry around artificial intelligence is experiencing such a boom and that he has the world’s leading corporations in his economy,” says David Kohl, chief economist at Bank Julius Baer. In the third quarter, gross domestic product (GDP) increased by 4.3 percent on an annual basis. The US economy has not grown this strongly since the summer of 2023 – mainly thanks to billions of dollars in investments in data centers.
But especially with regard to AI, it is questionable how sustainable the growth is for the US economy and whether it will even be reflected in positive development for companies and employment, says Laura von Daniels from the Science and Politics Foundation (SWP). “There is a question mark behind it – simply because we have increasing automation and the use of artificial intelligence in the labor market.”
“Not a mature strategy”
According to Trump’s own statement, the aim of Trump’s economic policy around tariffs, deregulation and tax cuts is to protect domestic industry, increase production by US companies and thus create jobs. “What Trump needs for this is investments in his own country,” explains von Daniels.
In negotiations with trading partners, he received concessions that they wanted to invest in the US market. “But that says nothing about what investment activity in the USA will actually look like in the next few years,” says the expert. In addition, the overall economic effect is questionable. “We see pressure being exerted on other countries, but he has not yet presented a mature economic or industrial policy strategy,” said von Daniels.
In any case, Trump’s promises have not yet been received on the job market. In November, the unemployment rate climbed to a four-year high of 4.5 percent. The manufacturing sector is particularly weak. According to the US Labor Market Authority, 8,000 industrial jobs were eliminated in December alone. “Here too, Trump does not present any concepts as to how he would like to maintain or increase employment in the USA,” says von Daniels. An example of this is the Taiwanese chip manufacturer TSMC. “They invest in the US market and want to produce chips there, but due to a lack of sufficiently qualified workers, they bring their own experts, their own skilled workers.”
Trumps Approval ratings sink
The defining theme of Trump’s campaign was inflation. He won the election partly because he complained about the high prices and blamed the Democratic Party around Joe Biden and Kamala Harris for them.
The picture has now been reversed. Inflation has remained stable recently: year-on-year, consumer prices rose by 2.7 percent in December, as in the previous month. The problem for Trump is, above all, the high cost of living in the USA – such as housing and food.
They recently gave the Democrats electoral victories in several states. Because Trump had promised to lower prices “very, very quickly” and “make America affordable again.” Nevertheless, the price level is around 25 percent above the level before the Corona crisis. A number of everyday goods such as eggs, coffee, steaks and orange juice have become symbols of the so-called affordability crisis. Although wages have risen sharply during this time, people are generally much more aware of price increases.
According to a Reuters/Ipsos survey, approval of Trump’s economic policies among all US citizens has now fallen to 33 percent, the lowest level since he took office. In addition, consumer sentiment has been falling continuously for months. “For me, this is also an indicator that people have a good sense that Trump wants to sell them something that is expected to have relatively little real impact,” said von Daniels.
Tariffs mean higher prices for consumers
It is rather questionable that the costs for US citizens will fall in the future – on the contrary. The reason: The import tariffs introduced by Trump, which are intended to stimulate demand in the USA and burden foreign exporters, could further increase prices. Only around four percent of the tariff burden has so far been borne by foreign companies, while 96 percent was passed on to US buyers, as a current study by the Kiel Institute for the World Economy (IfW) shows.
“The tariffs are an own goal,” says research director Julian Hinz. “The claim that foreign states bear these tariffs is a myth.” The tariffs made imported goods more expensive like a consumption tax.
“Initially, these negative effects of tariffs were somewhat mitigated by two factors: one is inventory at low prices,” says SWP expert Daniels. Old goods were still being sold off. The second factor is the willingness of foreign exporters to lower their prices and reduce profits. In contrast to Trump’s first term in office, this is decreasing more and more – at the expense of consumers.
Worries about further National debt
However, Trump was able to achieve two goals with the tariffs: On the one hand, the trade deficit shrank to around $30 billion, the lowest level since 2009. And on the other hand, according to the White House, the United States recorded around $200 billion in customs revenue last year. Trump wants to use this to finance his “Big Beautiful Bill” tax reform.
According to the British asset manager Insight Investment, customs revenue is only about half enough to cover the costs of the gigantic fiscal program. Despite cuts in health and social programs, experts expect debt to rise. The savings from the cuts are unlikely to compensate for the reduced revenue from the tax cuts in the law.
The US national debt has already exceeded the $38 trillion mark for the first time. “The fact that the US national debt ratio is currently more than 123 percent, measured as a percentage of gross domestic product, remains worrying,” says von Daniels. The continued “exorbitant privilege” of the most important economy and the dollar still attract investments. Whether it will stay that way in the future depends on whether Trump continues his attacks on the Federal Reserve (Fed) as an independent central bank.
With information from Claudia Wehrle, ARD financial editorial team.
