In this analysis, we delve into Donald Trump’s economic policies during his second term, examining how they may contradict his objective of revitalizing the American economy. Authored by former high-ranking policymakers, this article offers a comprehensive view of the President’s actions and their implications for everyday Americans.
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
Upon assuming office for the second time, Donald Trump indicated that significant shifts in U.S. government policy were forthcoming. This column assesses how President Trump’s actions may have undermined his proclaimed objective to “Make America Great Again,” characterized by low inflation, robust growth, and high employment rates. Instead, his policies appear to generate increased frustration and disappointment among many Americans.
Since January 2025, President Trump has initiated sweeping foreign policy changes that have cooled economic relations with key allies, including Canada, Mexico, and much of Europe, while shifting U.S. support away from Ukraine towards Russia. Domestically, notable actions have included a rise in deportations and the controversial targeting of individuals suspected of drug trafficking in the Caribbean. Nevertheless, Trump’s economic strategies appear misaligned with his goal of achieving low inflation and high growth.
Inflation has remained persistently around 3%, significantly surpassing the Federal Reserve’s target of 2%. Nonetheless, Trump has criticized the Fed for not implementing more aggressive rate cuts, even though lower interest rates typically correlate with increased inflation. Furthermore, he has asserted his authority to dismiss Federal Reserve governors based on dubious charges (Manners et al. 2025), signaling his intention to appoint a more compliant Fed chair. Displeased with unfavorable data from the Bureau of Labor Statistics, he dismissed its head, undermining the credibility of a vital institution for economic policy formulation.
These measures have failed to lower inflation expectations. Historical trends indicate that political interference in central banks often leads to higher inflation rates than would otherwise occur.
Despite Trump’s criticisms of the Fed, the economy has shown resilience, with unemployment rates remaining low and private sector job creation ongoing, particularly in healthcare (Hiring Lab 2025). The stock market has thrived this year; however, voter dissatisfaction regarding the economic situation has emerged in recent election outcomes.
What concerns everyday Americans the most? Trump rode to victory, in part, on promises to assist those at the lower end of the income scale. Yet, during his second administration, income and wealth disparities have widened, and his policies threaten to exacerbate these divides (Goulart and Shuster 2025).
For lower-income individuals who purchase insurance through exchanges, healthcare premiums have surged dramatically. The Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps, faced harsh cuts during the recent government shutdown—a deliberate act by the administration asserting legal authority in court. Additionally, the cost of electricity—a necessity for survival amid extreme weather conditions—has seen significant increases in various markets. Housing prices remain elevated, rendering shelter increasingly unaffordable for many.
Trump’s approaches to trade, immigration, taxation, and artificial intelligence have not alleviated these financial pressures, nor has his rhetoric against the Fed or immigrants.
Tariffs, which disproportionately burden lower-income Americans, have compounded these cost challenges (Clausing and Lovely 2024). Families already struggling are feeling further financial strain, as nearly all benefits from Trump’s “Big Beautiful Bill” favor those who are already affluent.
Beyond escalating income and wealth inequality, average Americans face the ramifications of the uncertainty stemming from Trump’s policies. Newly imposed tariffs were announced on “Liberation Day” in April, only to be varied and suspended, leading to a trade war followed by an uncertain truce with China. Such unpredictability discourages businesses from investing, hiring, or increasing wages (Andrade et al. 2025).
While the stock market surge may attract significant media coverage and presidential focus, approximately 60% of Americans own stocks, and many lower-income individuals have little or no stake in the market. Most market gains are concentrated among the wealthiest citizens.
Despite the buzz surrounding artificial intelligence, its current economic impact primarily involves capital expenditure on data centers and chips, creating jobs for a select few workers. However, the resulting infrastructure is highly automated, likely leading to only about 100 positions per data center. Additionally, many companies are likely to utilize AI primarily for automation, which could decimate job opportunities. The energy demands of these data centers are also driving up electricity costs nationwide.
The growing frustration with inequality, the sentiment of being ‘left behind,’ and increased polarization were pivotal in Trump’s election victories in 2016 and 2024. Though the first Trump term ended during the traumatic period of COVID, it did little to alleviate inequality and expand opportunities. With a second term, Trump has shown readiness with policies intended for implementation. Nonetheless, these economic strategies appear poised to bring about more disappointment for the majority of Americans.
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