The Trump economy: No recession, but no boom either

President Trump won reelection on a promise to bring economic growth back to its prepandemic highs from his first term. The centerpiece of his plan was to levy higher tariffs on imported goods, thereby cutting the trade deficit, boosting U.S. manufacturing, and collecting higher revenues.

In April, Mr. Trump sent the stock market into a temporary nosedive when he announced sweeping tariffs on nearly all countries, particularly penalizing nations that ran trade surpluses with the U.S. Before these “Liberation Day” tariffs, which were almost immediately paused to allow for negotiations, the administration had raised levies on China, as well as on Mexico and Canada, which are among America’s largest trading partners. Subsequent deals have led to lower tariff rates for many countries, while importers have successfully sought exemptions. Still, the effective tariff rate on imported goods now averages 11.2%, up from 2.5%, according to the Tax Foundation.

Economists say uncertainty over tariffs has been a drag on the economy, with annual growth projected to come in near 2% for the 2025 calendar year. But, so far, predictions that Mr. Trump’s tariffs would drive up inflation and send the economy into recession have not been borne out. Prices of imported goods have risen, but inflation, while above the Federal Reserve’s target level, hasn’t spiked. Still, the full impact may just be delayed: Many companies built up pretariff inventories, and gyrating tariff rates make it tricky for retailers to set prices.