For all the chaos along the way, President Trump’s first year back in the White House is ending with an economy that looks, by most conventional measures, much like the one he inherited. Unemployment is low, consumer spending is strong and inflation is stubbornly high but gradually improving.
Tariffs, Mr. Trump’s signature economic policy, haven’t set off the manufacturing renaissance he promised, but nor have they caused the surge in inflation that many forecasters feared. The stock market bobbed and weaved its way to a solid if not spectacular 16 percent gain. Analysts who began 2025 warning of the perils of uncertainty ended it by remarking on the U.S. economy’s surprising resilience.
Yet it would be a mistake to think that Mr. Trump’s actions left the economy unscathed.
Much more so than in his first four years in office, Mr. Trump has begun his second term with what amounts to an all-out assault on many of the institutions and policy paradigms that have long been seen by leaders of both major political parties as the foundations of American economic strength.
He has sought to undermine the independence of the Federal Reserve, fired the head of the Bureau of Labor Statistics, an agency that collects key economic data, and cut funding to the universities that conduct much of the country’s cutting-edge scientific research. He has intervened in private business deals, taken stakes in private companies and threatened corporate executives who do not adequately embrace his policy priorities. He has sharply restricted immigration, questioned the value of America’s alliances and imposed punishing tariffs on friends as well as adversaries.
Many of those actions are being challenged in the courts, and future presidents could reverse course on at least some of the current administration’s policies. But economists from across the ideological spectrum warn that Mr. Trump is setting the country on a path that will, in the long run, leave the economy less dynamic, the financial system less stable and Americans less prosperous in the decades ahead.
“We’re weakening the special sauce that made America so great,” said Kimberly A. Clausing, an economist at the University of California, Los Angeles, School of Law.
Ms. Clausing worked in the Treasury Department in the Biden administration. But her concerns are shared by many economists on the right, including some who have worked for Mr. Trump.
Vance Ginn, who served as chief economist in the Office of Management and Budget during Mr. Trump’s first term, praised the administration’s efforts to eliminate regulations and lower corporate taxes. But he said the benefits of those moves are outweighed by the costs of its policies on trade and immigration, its failure to rein in the federal deficit and its intervention in the private sector.
“On net, the policies have been negative for the economy,” Mr. Ginn said.
The effects will most likely be subtle, however, showing up as a steady drip of slower growth and higher interest rates that are hard to detect in the moment. A more acute crisis, if one comes at all, might show up years or decades in the future, much too late for voters to hold Mr. Trump or his administration accountable.
“We know from a lot of historical experience that the sort of things he’s doing are antithetical to prosperity in the long run,” said Gregory N. Mankiw, a Harvard economist who worked in the White House under President George W. Bush. But, Mr. Mankiw added, it is impossible to know exactly when or where those consequences will be felt.
Anxious Voters
More politically salient in the short run may be Mr. Trump’s failure so far to address the widespread economic dissatisfaction that helped him win the 2024 election in the first place. Mr. Trump ran for president on a promise to “end inflation” and even to bring down prices — something that economists at the time dismissed as fantasy but that connected with voters frustrated by years of big price increases.
Once back in office, however, Mr. Trump said little about longstanding cost-of-living issues like housing and child care, and he opposed extending subsidies that made health insurance cheaper for people who buy coverage on federal health care exchanges. Instead, he focused on imposing tariffs, a policy that economists warned would lead to higher prices.
Members of the public shared those concerns about tariffs. Consumer sentiment rallied when Mr. Trump won the 2024 election, but cratered during the chaotic early days of his administration. For much of last year, well over half of the people responding to the University of Michigan’s long-running sentiment survey spontaneously brought up tariffs, with most of them saying they expected prices to rise as a result.
More recently, Americans have cited a new concern: the job market. Unemployment has risen only modestly over the past year, but hiring has slowed significantly, and Americans have become increasingly worried about their ability to find a new job if they lose their current one. That has fed into affordability concerns, as Americans, still frustrated by high prices, now also worry about losing their incomes.
“They see young people around them struggling to find a job,” said Joanne Hsu, who directs the Michigan survey. “They see how people who are unemployed and looking for work, they see how long it takes them to find a job. So even though we don’t have mass layoffs, I think it’s unambiguously the case that it is harder to find a job now than it was just a few years ago.”
Long-Run Challenges
Mr. Trump’s defenders argue that it will take time for his policies to bear fruit. Companies will have to adapt their strategies to a world with higher tariffs and fewer immigrant workers, then build the factories and buy the equipment to put those new plans in place, argued Oren Cass, a longtime critic of free trade who leads American Compass, a populist think tank.
“Hiring people to work in your factory is not something that you do within six months of a global economic reset,” Mr. Cass said. “You’re lucky if the company has finished developing its new strategy yet, let alone started putting shovels in the ground on anything.”
Few economists share Mr. Cass’s optimism around Mr. Trump’s trade policies. But while tariffs dominated the conversation in 2025, many economists say they are far from the most damaging policies Mr. Trump has embraced.
They are much more worried about Mr. Trump’s efforts to undermine the Fed’s independence, which, if successful, could make it harder for the central bank to rein in inflation — or, in a potentially even more damaging scenario, cause investors to lose faith in the value of government-issued bonds or the dollar.
They are worried about yawning budget deficits — a problem that long predates Mr. Trump but that was made worse by the tax-and-spending bill he signed last year. That, too, could cause a fiscal crisis down the road.
They are worried that by defunding universities and revoking student visas, the Trump administration will make the United States a less attractive place to do scientific research — robbing the country of an advantage that has helped power its world-leading growth since World War II.
And they are worried that by using his powers to attack his enemies and reward his friends, Mr. Trump will erode the system of rules and laws that for decades have made the United States the safest place for investors to bet their money and for entrepreneurs to build their businesses.
None of those concerns is likely to lead to a recession in 2026. Indeed, most forecasters expect growth to pick up this year. And the U.S. economy still has a wealth of advantages — including the absence of an obvious international alternative — that won’t disappear over night.
But Ms. Clausing, the U.C.L.A. economist, warned against assuming that just because Mr. Trump’s policies haven’t harmed the economy yet, they never will.
“The long run takes a long time to arrive, and when it comes it comes with astonishing swiftness,” she said. “I don’t know when the chickens come home to roost, but they will.”
Ben Casselman is the chief economics correspondent for The Times. He has reported on the economy for nearly 20 years.
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