US Economy Under Trump: Growth Amidst Inflationary Pressures
Under President Donald Trump's second term, the US economy shows strong growth driven by AI investments, but faces challenges with rising inflation and varied impacts on household incomes.
Ahead of the midterm congressional elections, President Donald Trump has been highlighting the performance of the US economy, claiming he has boosted incomes, reduced inflation, and created jobs. However, an analysis by BBC Verify presents a more nuanced picture, supporting some of these claims while raising concerns about others.
Highlights
- The US economy has been the fastest-growing among G7 nations during Trump's second term, with an annualized GDP growth rate of 2.2%.
- Significant investments in artificial intelligence (AI), particularly in data center construction, are a major driver of economic expansion.
- Inflation remains above the 3% rate Trump inherited, with new tariffs and the US-Israel war with Iran contributing to rising prices.
- While median incomes rose by 2.6% in 2025 to a record high, middle and lower-income households are estimated to be worse off due to higher prices and expiring subsidies.
- Job creation has slowed compared to the previous administration, and manufacturing employment has seen a slight decrease.
Details
The US economy has performed better than many expected following Trump's implementation of new tariffs in 2025. The Gross Domestic Product (GDP) is expanding at an annualized rate of 2.2%, and has grown by approximately 3.2% overall since the end of 2024, just before Trump began his second term. This growth rate has surpassed initial forecasts by the International Monetary Fund (IMF), partly because Trump significantly eased the tariffs in subsequent months.
A key factor supporting economic growth has been the massive investments by American technology companies in AI, including the construction of data centers. Spending on data center construction reached $5 billion in August 2026, nearly double the monthly rate when Trump returned to office. However, the economy could falter if this spending were to dry up. Inflation, meanwhile, has risen above the 3% rate Trump inherited, driven by new tariffs and the impact of the Iran war on global energy prices. The price of a gallon of diesel hit a record high of $6.52 in September.
In the labor market, an average of 34,000 jobs have been added each month, significantly lower than the 122,000 monthly jobs added in the final year of Biden's presidency. Manufacturing employment, at 12.6 million in September 2026, is slightly lower than at the start of Trump's second term. However, the unemployment rate remains relatively low at 4.2%, partly due to Trump's immigration crackdown reducing the available workforce. Government borrowing has increased in Trump's second term, reaching a federal deficit of $2 trillion in the year to September 2026, equivalent to about 6% of US GDP. This has also pushed up interest rates on mortgages, with a new 30-year US mortgage now at 7.4% per year.
Why it matters
The US economy under the Trump administration demonstrates robust growth on a global scale, yet the costs and benefits of this growth are unevenly distributed domestically. High inflation and increased government borrowing are negatively impacting the purchasing power of middle and lower-income households, while tax cuts have primarily benefited the wealthiest. This raises important questions about the equity and sustainability of economic policies and their broad impact on the American populace.