President Donald Trump has been promoting the performance of the US economy ahead of the midterm congressional elections, claiming he has boosted incomes, reduced inflation and created jobs. He has repeatedly said the country is the hottest anywhere in the world.
A review of the latest data and independent estimates suggests the picture is more mixed. The overall economy is growing at a respectable pace by the country’s recent standards, but tariffs and the US-Israel war with Iran have pushed up prices, and the economy relies heavily on an investment boom in artificial intelligence.
Growth beats many forecasts but leans on AI spending
US gross domestic product, which measures the size of the economy, is currently expanding at an annualised rate of 2.2%. It has risen by around 3.2% since the end of 2024, just before Trump began his second term, which is more growth than any other member of the G7 group of leading economies over that period.
The growth rate has been faster than the International Monetary Fund had forecast after Trump announced a wide range of new tariffs on goods entering the US in April 2025. The IMF had cut its forecasts at the time, citing the harm that import duties would do to investment and consumer spending. Trump later eased the tariffs considerably, which reduced the impact originally expected.
Much of the recent strength has come from American technology companies investing heavily in artificial intelligence, including building data centres across the country. Spending by US businesses on data centre construction, excluding the IT hardware installed inside them, was $5bn in August 2026, almost double the monthly rate when Trump returned to office. The analysis noted that the economy could falter if that spending dried up.
Inflation is lower than its 2022 peak but above the level Trump inherited
The current rate of US inflation is 3.7%. That is well below the recent peak of 9% under Joe Biden in 2022, but higher than the 3% rate Trump inherited in January 2025. Many voters punished Biden in the 2024 presidential election, holding him responsible for a sharp spike in prices after the pandemic.
Economists estimate that US inflation would have been lower without the new tariffs Trump has imposed since returning to office. The disruption to oil and fuel supplies from the Middle East caused by the Iran war has also pushed up domestic prices, as global energy costs have risen.
The price of a gallon of diesel, a fuel used by drivers as well as widely in agriculture and industry, hit a record high of $6.52 in September. Prices for some grocery staples, including beef and coffee, have risen since Trump returned to office, while eggs have become cheaper. Some US retailers have warned that higher energy costs linked to the Iran war will make food more expensive to produce and raise prices at the checkout.
Household incomes rise on average but some families lose out
Average household incomes are still rising. The median income, adjusted for inflation, rose 2.6% in 2025 to $87,460, the highest on record.
The Institute on Taxation and Economic Policy, a think tank, has estimated the combined effects of two factors on US households. The first is the expiry of extra government subsidies that had made health insurance cheaper for millions of Americans. The second is higher-than-expected price rises during Trump’s second term, including those linked to tariffs and the Iran war.
The institute concluded that the middle fifth of households are on average around $1,700 worse off in 2026 than they would otherwise have been, while the poorest fifth are around $750 worse off. The richest 1%, by contrast, are estimated to be on average $12,560 better off, primarily because of Trump’s tax cuts. Estimates on tariffs from the Tax Foundation, another think tank, are broadly similar.
Trump predicted his tariffs would leave America flooded with jobs as manufacturers built new factories on US soil to avoid import taxes. Since he returned to the White House, an average of 34,000 jobs have been added each month. That is significantly fewer than the 122,000 jobs added each month in the final year of Biden’s presidency.
The number of Americans employed in manufacturing, 12.6 million in September 2026, is slightly lower than when Trump’s second term began. The unemployment rate remains relatively low at 4.2%, broadly where it was when Trump returned. Part of the reason is his immigration crackdown and deportation programme, which has reduced the available workforce and means fewer new jobs are needed each month to stop unemployment rising.
Rising borrowing costs push up mortgage rates
US government borrowing has increased during Trump’s second term, partly driven by his significant tax cuts. The federal deficit, the gap between tax revenue and spending, reached $2 trillion in the year to September 2026, equivalent to around 6% of GDP. The deficit is projected to rise above 8% of GDP by 2030.
The high level of government borrowing is itself helping to boost GDP growth. However, the IMF has warned that excessive borrowing, together with rapidly rising national debt, is raising the risk of a future financial crisis in America, which would deeply damage most American households.
The growing deficit is one reason the government pays more to borrow in financial markets. The 10-year US government bond yield has risen sharply since Trump returned to office in January 2025 and is now above 5%, its highest level since the global financial crisis in 2007. That increase also puts upward pressure on mortgage rates. The interest rate on a new 30-year US mortgage has risen to 7.4% a year, up from 6.9% when Trump returned to the White House.
Higher rates have added to pressures in the housing market, making homes less affordable for new buyers. Many existing homeowners are reluctant to move, because doing so would mean giving up cheaper mortgages taken out at lower rates, which cannot be transferred to a new property.
