Yves here. This post on Trump’s economics, if you can even depict him as having ideas beyond loving tariffs, crypto, and lower taxes, is by former senior government officials in policy roles and is thus more heavyweight than normal VoxEU fare. It gives a high level view of what Trump has been up to and how that amounts to defaulting on his MAGA promises.
By Gary Gensler, Professor of the Practice, Global Economics and Management, and Professor of the Practice, Finance, Sloan School of Management Massachusetts Institute of Technology; Simon Johnson, Ronald A. Kurtz Professor of Entrepreneurship, Head of the Global Economics and Management Group and Faculty Chair of the Sloan Fellows Programme Massachusetts Institute of Technology; Ugo Panizza; Vice President Centre for Economic Policy Research; Professor of Economics and Pictet Chair Geneva Graduate Institute; and Beatrice Weder di Mauro, President Centre for Economic Policy Research; President Professor of Global Economics, Climate and Nature Finance Geneva Graduate Institute; Visiting Professor Hoffmann Global Institute for Business and Society INSEAD. Originally published at VoxEU
As soon as he took office for the second time, Donald Trump made it clear that there would be dramatic changes in US government policy. This column describes how President Trump’s actions may have undermined his stated goal to “Make America Great Again” with low inflation and high rates of growth and employment. Instead, the policies seem more likely to deliver additional frustration and disappointment for most Americans.
As soon as he took office for the second time, Donald Trump made it clear that there would be dramatic changes in US government policy. Since January 2025, President Trump’s foreign policy changes have led to a cooling of economic relationships between the US and its closest allies (including Canada, Mexico, most of Europe, and NATO), a shifting of American support away from Ukraine towards Russia, and attacks on alleged drug traffickers in the Caribbean. On the domestic policy front, there have been headline-grabbing actions, such as an increase in deportations (and seizing people off the streets without appropriate due process). In terms of economic policies and outcomes, though, President Trump’s actions may have undermined his stated goal of “Making America Great Again” with low inflation and high rates of growth and employment.
Inflation has continued to run around 3%, significantly above the Federal Reserve’s 2% target. Yet President Trump has repeatedly railed at the Fed, including ad hominem, for not lowering interest rates further and faster – despite the fact that easier monetary policy is usually associated with higher inflation. He also has asserted his right to fire Federal Reserve governors on the basis of thin and unproven charges (Manners et al. 2025). He has made it clear that the next chair of the Fed will be someone whom he expects to be more pliant. When the President did not like the data reported by the Bureau of Labor Statistics, he fired its head, undermining the credibility of an institution that provides a fundamental input for the conduct of sound economic policy.
None of these moves has lowered inflation expectations. History tells us that political control over any central bank results in higher inflation than would otherwise be the case.
President Trump is lashing out at the Fed even though the economy has remained resilient. Unemployment remains relatively low, and the private sector continues to create jobs, although most of these jobs are in healthcare (Hiring Lab 2025). The stock market has done remarkably well so far this year. Yet, as evidenced in the last month’s election returns, there is voter dissatisfaction with the economy during this administration.
So, what is the problem on everyday Americans’ minds?
President Trump was elected, in part, on the promise of helping people lower down the income scale. Under his second administration, though, income and wealth gaps have only widened – and his policies are likely to further widen the gap (Goulart and Shuster 2025).
Healthcare premiums for (lower-income) people who buy insurance through exchanges have risen dramatically. The supplementary food aid programme (SNAP, previously known as ‘food stamps’) was cut sharply during the recent government shutdown – deliberately by the administration, which argued in court cases that it had the authority to do so. The cost of electricity – essential to survival in a country with extremes of hot and cold – is up sharply in many markets. House prices remain high and shelter is increasingly unaffordable for many.
The President’s policies on trade, immigration, taxes, and artificial intelligence do not lower these costs. Nor does invective against the Fed or against immigrants.
Adding to these cost pressures, tariffs are a tax – one that falls disproportionately on lower-income Americans (Clausing and Lovely 2024). Families already struggling to pay their bills are finding themselves squeezed further. Almost all the tax reductions from President Trump’s “Big Beautiful Bill” go to people who are already well-off.
Beyond the widening income and wealth gaps, everyday Americans are dealing with the consequences of the high degree of uncertainty created by President Trump’s actions. Newly announced tariffs were high and across the board on “Liberation Day” in April, then they were suspended, then some were negotiated lower while others were raised arbitrarily. There was a trade war and then one year truce with China. This kind of uncertainty does not encourage companies to invest, hire workers, or pay better wages (Andrade et al. 2025).
The stock market boom may garner much press and presidential attention – but only roughly 60% of Americans own shares – and most lower-income Americans do not own much or any stock. The vast majority of market gains have accrued to the richest Americans.
Further, regardless of all the hype about AI, its current economic effect largely has been capital spending on data centres and chips. This spending creates good jobs for some workers, but the resulting infrastructure is highly automated and likely will only employ 100 people per data centre. For many companies, near-term applications of AI primarily will be for automation – meaning fewer jobs. Further, the power demands from all those data centres is pushing up electricity costs across the country.
Frustration with inequality, a sense of being ‘left behind’, and polarisation played a role in the election of Donald Trump in 2016 and again in 2024. Though it ended during the traumatic experience of COVID, the first Trump administration had done little to reduce inequality and broadly share opportunity. President Trump came to office a second time much more prepared, with policies he was determined to implement. On the economic front, though, these policies seem more likely to deliver additional frustration and disappointment for most Americans.
See original post for references
