Dive Brief:
- Donald Trump has helped spur economic growth but job growth has slowed during his second term as president, and his sweeping unilateral tariffs have yet to consistently reduce the trade deficit, according to the German Economic Institute.
- Moreover, Trump imposed import taxes to lure foreign direct investment to the U.S., yet FDI in 2025 totaled $248 billion, 8.2% less than the previous year and 18% less compared with the average from 2015 to 2024, according to the institute, also known as the IW.
- Analysis of Trump’s economic policy since January 2025 “shows a mixed picture of success and highlights the fragility of the current U.S. growth model,” the IW said. “While GDP [gross domestic product] growth remains robust and [domestic] investment is increasing substantially, the labor market adds fewer jobs than under the previous U.S. administration and inflation has been well above the U.S. Federal Reserve’s target of 2%, which adds to the ongoing affordability crisis.”
Dive Insight:
With the approach of a bitter, highly partisan midterm election on Nov. 3, the IW report provides an external assessment of whether Trump has made good on the promises he made in 2024 to secure a second term.
Although Trump’s policies helped generate 3.4% GDP growth during the third quarter, he has fallen short on a pledge to curb inflation and improve other aspects of economic well-being, according to the IW, which is based in Cologne, Germany.
“Trump promised to lower the cost of living, to reduce the U.S. goods trade deficit, support business by lowering taxes and to rebuild the U.S. manufacturing base with the help of foreign direct investment,” the institute said.
“Two years later, the cost of living dominates the electoral landscape,” according to the IW. Also, the monthly trade deficit in goods totaled $130 billion in August, exceeding the total in August 2024, the institute said.
“Rising inflation, driven in large part due to heightened energy costs from the U.S.-Israeli war against Iran, has pressured American households at a time of near-record wealth inequality, unstable bond markets and questions about artificial intelligence’s impact on the job market,” the IW said.
While unemployment has hovered between 4.1% and 4.3% this year, other gauges of the job market have worsened under Trump, the IW said.
The long-term unemployment rate increased to 27% in September from roughly 18% in 2023, the institute said. Also, the labor force participation rate fell to 61.8% in September from 62.6% in January 2025, according to the IW.
Job growth has also slowed since 2025. The U.S. added around 200,000 jobs every month in 2023 for a total of about 2.5 million for the year, the IW said.
Payroll growth declined to 2 million in 2024 and slumped to roughly 120,000 new jobs last year, the IW said, citing the immigration crackdown and stepped up retirements.
On the eve of the elections Trump has pressed his argument of economic progress.
“The U.S. Economy is BOOMING,” he said on Truth Social after the report on robust Q3 growth on Thursday.
“Consumer spending is WAY UP, Business Investment is WAY UP and Investment in new Equipment EXPLODED by 21%, which means Record Numbers of Factories and Companies are being built and expanded in the U.S.A.,” he said, adding “We are smashing expectations.”
The White House has reinforced the president’s message.
Trump has “delivered the largest working-class tax cuts for American families, the largest decrease in prescription drug prices for Americans in nearly 70 years, reached record-high real median household income, created over 1 million private-sector jobs, secured TRILLIONS in investments across the country, reignited American manufacturing and achieved record-low poverty,” the White House said Thursday.
Many consumers do not see the fruits of solid economic growth.
Inflation has outpaced the Fed’s target for more than five years and, for several months, has increased faster than household incomes, bolstering a public perception of waning buying power.
Personal income increased 0.2% last month, lagging inflation, the Bureau of Economic Analysis said Thursday.
As a result, real disposable income in September fell 0.3%. Meanwhile, the personal saving rate slumped to 3.8%, the lowest level since Oct. 2022.
Democrats in their campaigning have highlighted the challenge of affordability.
“Right now folks are struggling across the country with high costs – housing, food, health care,” Rep. Suzan Delbene, D-Wa., said Thursday.
“What we've seen is directly the result of policies put in place by this administration and Republicans in Congress,” said DelBene, chair of the Democratic Congressional Campaign Committee.
“People want us to focus on costs, lowering costs,” she said in a CBS News interview, adding “that's our top priority.”
“We're going to hear across the country after, and definitely on Tuesday, that people are tired of the broken promises,” DelBene said.
