Key Highlights
- Economic uncertainty in 2025 due to policy changes and trade tariffs.
- Real GDP growth saw fluctuations in the first year of Trump’s second term.
- Federal workforce reduction led to financial strain for some families.
- Inflation rates have slowed but remain above target levels.
- Manufacturing sector continues its trend of weak job growth despite tariffs.
The Economic Landscape Under Trump’s Second Term
One year into his second term as president, Donald Trump faced a complex economic environment marked by uncertainty and shifting policies. This period, spanning from October 2025 to September 2026, saw the implementation of various economic measures aimed at bolstering growth and addressing domestic challenges.
Economic Uncertainty and Policy Changes
Elizabeth Renter, a senior economist at NerdWallet, noted that policy changes and potential shifts created a climate of uncertainty for consumers, job seekers, and businesses. “There was a lot of guesswork happening in 2025,” she observed, adding that economic statistics became more difficult to interpret amid ongoing transformations.
Real GDP Growth: Fluctuations Amid Tariffs
The performance of the economy was reflected in real GDP growth, which showed mixed results. In the second and third quarters of 2025, there were signs of growth after a decline in the first quarter as businesses prepared for new tariffs. However, according to Gregory Daco, chief economist at EY, the aging population and reduced net migration posed ongoing challenges.
“Businesses are very cautious about hiring,” Daco stated. “They don’t necessarily need as much talent as they did a year or two ago.” This cautionary approach affected job creation, leading to a continuation of weak growth in manufacturing despite tariff measures aimed at reviving domestic industries.
Federal Workforce Reduction and Its Impact
The federal government took steps to reduce its workforce through actions like reduction-in-force and buyouts. Cameron Hilaker, an AFGE Local 1534 member who was laid off from the US Agency for International Development, highlighted the personal impact of these decisions. “Without my government paycheck,” he said, “my family can’t afford childcare expenses.” This shift in federal employment had broader implications, affecting not only public sector workers but also private businesses that rely on government contracts.
Inflation: A Persistent Challenge
Despite efforts to cool inflation, the rate remained above the Federal Reserve’s 2% target. While it slowed initially after reaching a high of about 9% in 2022, it picked up again by December 2025. Jason Draho from UBS Global Wealth Management attributed part of this rise to tariffs and other measures. “The inflation rate climbed higher than expected,” he noted, adding that retailers and producers had been reluctant to pass along cost increases to consumers.
However, Renter argued that the effects of tariffs were more gradual, impacting a variety of goods rather than causing one-time price spikes. This made it difficult for monetary policy makers to accurately gauge the extent of tariff-related inflationary pressures.
Consumer Spending: A Mixed Picture
Despite economic uncertainty, consumer spending remained strong but unevenly distributed. According to Renter, wealthier individuals were driving much of this robust spending, while lower-income Americans had to cut back. “Much of the spending has been coming from people with assets and high incomes,” she explained, noting that those who owned their homes or were invested in the stock market felt more secure.
This K-shaped recovery highlighted the structural challenges facing the economy, where different segments experienced divergent outcomes based on pre-existing wealth disparities. The continuation of this trend could have long-term implications for economic inequality and overall growth prospects under the Trump administration’s policies.
Conclusion
A Year of Economic Challenges and Resilience
In summary, Donald Trump’s second term saw a complex interplay between policy changes, market fluctuations, and broader social trends. While there were pockets of resilience and some progress in specific areas like manufacturing investment, the overarching narrative was one of economic uncertainty and continued challenges. As the president looked towards his final year in office, these dynamics would continue to shape both domestic and global economic landscapes.
