The first 18 months of President Donald Trump’s second term have brought a series of major economic disruptions.
Many of these shocks followed policies promised during the 2024 election campaign, including stricter immigration controls, mass deportations and higher import tariffs. However, the unexpected war with Iran has created additional pressure by lifting oil prices and threatening global supply chains.
The U.S. economy has handled these developments better than many economists initially expected. Nevertheless, Trump’s promises to lower prices, revive manufacturing employment and improve living standards for middle-class households have yet to produce clear results.
With the midterm elections approaching, the economy appears resilient but increasingly stagnant in several areas central to the administration’s agenda.
Immigration Policies Reduce Labor Force Growth
The Bureau of Labor Statistics household survey provides one of the broadest measures of U.S. employment.
Changes to population estimates introduced in early 2026 make the published figures difficult to compare directly with previous years. The revised data produced a sharp January decline in both employment and the number of people searching for work.
However, the agency also publishes an experimental series that applies the updated population estimates to data going back to April 2020. This creates a more consistent basis for comparison.
That series shows that both the labor force and total employment have declined since Trump returned to office.
This trend is partly connected to tougher immigration restrictions and increased deportations. Combined with an aging U.S. population, these policies have reduced the number of available workers.
Manufacturing Revival Has Yet to Appear
Trump argued that tariffs and immigration restrictions would help revive American manufacturing and create new factory jobs.
A major investment boom has taken place, but much of it has been concentrated in artificial intelligence infrastructure and data centers. The long-term effects of these projects on productivity and employment remain uncertain.
AI investment has supported job growth in construction. However, payroll data shows that the U.S. manufacturing sector employs fewer workers than it did when former President Joe Biden left office in January 2025.
Some of Trump’s priorities are visible in the labor data. For example, government employment has declined.
Still, reshaping an economy of roughly 342 million people is difficult. Consumer demand continues to support restaurants, bars and service businesses. Meanwhile, an aging population is increasing demand for healthcare workers.
As a result, hiring remains strongest in sectors shaped by demographic and consumer trends rather than by the administration’s manufacturing agenda.
Inflation Progress Begins to Stall
Inflation was one of the most important issues during the 2024 election campaign.
Although price pressures had started to ease after the Federal Reserve raised interest rates, many households remained frustrated by the sharp increase in living costs following the COVID-19 pandemic.
Trump promised to bring prices down. However, broad declines in consumer prices are rare and usually occur only during severe economic downturns.
Reducing the inflation rate is more realistic than reversing previous price increases. Even so, progress during Trump’s second term has been limited.
Major inflation indicators suggest that disinflation has stalled. Price growth remains above the Federal Reserve’s 2% target, while policymakers are increasingly concerned that inflation could accelerate again.
Tariffs and Oil Prices Add Pressure
Higher tariffs have contributed to price increases for some imported products.
Energy costs have also become a serious concern. Oil climbed to around $100 per barrel, approximately 50% above its level before the Middle East conflict began in late February.
Meanwhile, the rapid development of AI infrastructure is increasing demand for electricity, construction materials, advanced chips and other resources.
Prices naturally move at different speeds across the economy. Some goods and services become more expensive while others become cheaper.
However, when price increases become widespread and repeatedly rotate between different categories, the result can become broader and more persistent inflation.
Several Federal Reserve officials view this as a growing risk.
Household Income Growth Loses Momentum
Consumer spending has remained surprisingly strong despite tariffs, geopolitical conflict and higher borrowing costs.
However, it is unclear how long households can maintain their spending levels.
Real disposable personal income, one of the broadest measures of household purchasing power, has recently stopped growing and has even declined during some periods.
Disposable income represents the money households retain after paying taxes. It includes wages, salaries and government benefits such as Social Security payments.
This is the money available to pay for housing, food, transport and other essential goods and services.
The slowdown suggests that household finances are becoming more strained, particularly among lower- and middle-income consumers.
Economic Gains Remain Uneven
Debate continues over whether the U.S. economy has become increasingly “K-shaped.”
Under this pattern, wealthy households and high-income earners continue to benefit from rising financial assets, while lower- and middle-income households experience weaker income growth and higher living costs.
Consumer spending has remained resilient so far. Nevertheless, stagnant purchasing power could eventually weaken demand and expose the growing gap between stronger and weaker households.
Housing Affordability Remains a Major Problem
Housing continues to consume a large share of American household income.
Trump has frequently promised to improve affordability. However, he recently dismissed congressional housing legislation as unimportant and declined to sign it.
The housing problem has developed over many years.
A long period of extremely low interest rates supported rising home prices. Demand increased further during the pandemic, while limited housing supply pushed prices even higher.
The Federal Reserve later raised interest rates to control inflation. This caused mortgage rates to surge and made homeownership less affordable.
Mortgage costs remain elevated. Home insurance premiums have also increased because of higher property values, construction expenses and other risks.
Washington Has Limited Control Over Housing Supply
The federal government can offer tax credits, financial support and other incentives to improve affordability.
However, local governments control many of the rules that determine where and how quickly new homes can be built.
Land-use restrictions, zoning regulations and lengthy approval processes continue to limit housing supply in many areas.
Therefore, meaningful progress requires action from both federal and local authorities.
For many Americans, homeownership remains a symbol of wealth and economic security. Yet the cost of purchasing and maintaining a property continues to take up an unusually large portion of household income.
Stock Market Gains Remain Solid
Trump has repeatedly highlighted record U.S. stock market levels as evidence that his economic policies are working.
However, stock indexes generally rise over long periods regardless of which political party controls the White House. Most modern presidents have seen markets reach record highs during their administrations.
Since January 2025, the S&P 500 has gained around 25% during Trump’s second term.
That performance is close to the median gain of approximately 24% recorded during the first 18 months of presidential terms dating back to Ronald Reagan.
Therefore, the market’s performance under Trump has been strong, but it ranks near the middle compared with other recent administrations.
It also compares favorably with the stock market’s longer-term compound annual growth rate of roughly 9.5%.
Artificial Intelligence Drives Investment Growth
Artificial intelligence has been one of the largest contributors to stock market gains and business investment since Trump returned to office.
Technology companies are investing heavily in data centers, semiconductors, energy infrastructure and advanced computing systems.
This spending has become an important source of U.S. economic growth. However, it has also raised questions about whether companies will eventually generate enough revenue to justify the scale of their investments.
AI Expansion Fuels a Corporate Bond Boom
The artificial intelligence boom is also transforming the corporate debt market.
Corporate bond issuance reached approximately $1.52 trillion during the first six months of the year. A significant portion of this borrowing has been used to finance AI infrastructure.
Issuance is currently running at a record pace, exceeding even the borrowing surge recorded during the post-pandemic period in 2020.
Strong investor demand and relatively narrow credit spreads suggest that companies still have healthy balance sheets and access to financing.
This supports the argument that the U.S. economy remains resilient, even as several areas show signs of slowing progress.
Trump’s Economic Record Remains Mixed
After 18 months, the U.S. economy has survived tariffs, immigration restrictions, geopolitical conflict and higher oil prices without entering a major downturn.
Employment remains relatively stable, consumer spending has held up and financial markets have continued to rise.
However, many of Trump’s main economic promises remain unfulfilled.
Manufacturing employment has not experienced a meaningful revival. Inflation remains above the Federal Reserve’s target, household purchasing power has stalled and housing affordability continues to deteriorate.
The economy has shown strength, but resilience alone may not be enough to convince voters that living standards are improving.
