Eight months after Donald Trump’s return to the White House, clouds have gathered over the US economy. His promise to strengthen America through a peculiar mix of trade protectionism, deregulation, fiscal stimulus, state capitalism and restrictive immigration policies has generated significant uncertainty, now increasingly reflected in macroeconomic data.
US economic growth has clearly slowed. In 2024, gross domestic product grew by 2.8%. In the first half of this year, that pace was cut by more than half. The job market has also lost momentum. Job creation has collapsed since the start of the year and has struggled to keep the unemployment rate steady. Even though unemployment remains low, the number of inactive Americans has risen by 1.2 million since April. Many workers have hesitated to change jobs out of fear that they would not find better opportunities elsewhere.
A majority of Americans elected Trump in 2024 hoping he would boost real wages as he did during his first term, thanks to tax cuts and deregulation. But his border tariffs and expulsions of foreign workers have had the opposite effect. The disposable income of the poorest 10% has plummeted, deepening inequality.
Impulsive decisions
Trump has accused the Federal Reserve of pursuing overly restrictive monetary policy by keeping interest rates too high. The excitement seen on financial markets suggests otherwise. Stock market indices have hit record highs and corporate debt issuance has surged. His persistent pressure on the central bank to lower rates could further stoke inflation, which, at nearly 3%, is not under control and is expected to accelerate as the effects of tariffs on imported goods spread throughout the economy.
These negative indicators have been compounded by impulsive decisions. While the US claims to want to attract global investment to revive the economy, the Trump administration has sent mixed signals to companies looking to set up operations. The recent immigration raid on a South Korean company and the introduction of prohibitive fees for obtaining a work visa are likely to dampen investor enthusiasm. Businesses now have to contend with politically unstable decisions that are legally uncertain and counterproductive for business operations.
US President Donald Trump during a visit to the Irvin plant operated by US Steel in West Mifflin, Pennsylvania, on May 30, 2025. SAUL LOEB / AFP
This mixed picture of the American economy has, for now, been largely obscured by the artificial intelligence (AI) boom. With massive investments across the entire value chain – from microprocessors to data centers to energy supply – this technology has emerged as the country’s main growth engine.
Yet the real impact of AI on jobs and productivity remains uncertain. It is likely that Americans will feel the effects of tariffs on their purchasing power long before they see the gains from AI. Moreover, the staggering investments and inflated stock market valuations in the sector cannot be sustained if profits do not materialize quickly. Should the AI bubble now forming burst, the emperor would have no clothes.
Translation of an original article published in French on lemonde.fr; the publisher may only be liable for the French version.