Just over six months into the second Trump administration, the White House has declared it is delivering on its promise to ‘Make America Wealthy Again.’ The economy has indeed proven resilient despite policy whiplash, but underneath exuberant markets and splashy deals, warning signs are emerging.
As policymakers and market participants weigh vexing decisions ahead, the president has been accused of eroding confidence in vital economic data and institutions. These actions hinder efforts to understand and respond to shifting economic conditions, with ramifications for the US and global economies.
Following a spate of self-described wins, the administration is touting the success of its ‘America First economic agenda’. Economic growth rebounded in the second quarter; major stock indexes are near records; tariff revenue jumped; and the White House announced eye-popping investment commitments from companies and trading partners. The administration has not been shy about taking credit, with Commerce Secretary Howard Lutnick proclaiming, ‘the Trump Economy has officially arrived’. But beyond framing and optics, durable results may prove elusive.
A more complex story
Behind the headlines lies a more complex story. Second quarter GDP figures reflected policy timing distortions and masked sluggish first half growth. In equity markets, a handful of companies’ growth keeps indexes buoyant, while other sectors and companies lag. And tariffs – at the highest average effective rate since the 1930s – have raised new revenue, but failed to boost manufacturing, which is contracting alongside factory employment.
At the same time, massive investment commitments may prove overstated. For instance, analysts view Apple’s $600 billion spending pledge as highly unrealistic. Trading partners’ commitments to invest in the US are similarly dubious. The European Union pledged $600 billion in investment and $750 billion in energy purchases as part of the EU–US trade deal. But the agreement is not legally binding, and EU lacks the authority to compel the private sector to invest or purchase accordingly. Likewise, Japanese and South Korean officials have clarified that their topline pledges will largely arrive as loans and guarantees rather than investment. This is hardly the first time a trading partner has fallen short; consider China’s failure to follow through on $200 billion in pledged purchases during Trump’s first term.
More broadly, cracks are showing throughout the US economy. From a softening housing market and struggling commercial real estate sector, to rising consumer debt delinquency, there is cause for concern. At the top of the list are inflation and jobs. While the Bureau of Labor Statistics’ (BLS) latest release showed inflation unchanged last month, it remains stubbornly above the Fed’s two per cent target. ‘Core’ CPI, on which many economists rely, jumped the most month over month since January. And the July producer price index – a gauge of the upstream prices businesses face – spiked to 0.9 per cent, well beyond the 0.2 per cent estimate, and the biggest jump since June 2022.
Meanwhile, July jobs figures fell short of economists’ expectations, with nonfarm payrolls rising just 73,000, and May and June numbers revised down 258,000. Weakening jobs data and sticky inflation have raised fears of recession or stagflation. This complicates the Federal Reserve’s pursuit of its dual mandate: price stability and maximum sustainable employment. Given that the economy has yet to feel the full effect of the administration’s tariffs, blunted by companies’ stockpiling goods and delays in policy, the Fed’s challenge may only grow if conditions deteriorate.
Undermining trust
The US’ apolitical central bank and impartial data infrastructure are foundational to its economic success and primacy in global markets. They matter even more during challenging periods with dissonant signals. The administration’s attacks on the Fed and government statistics risk undermining trust and confidence at a crucial moment.
Earlier this month, Trump fired BLS commissioner Erika McEntarfer over weak jobs numbers. To replace McEntarfer, Trump announced he will nominate a conservative economist of his own choosing, E. J. Antoni, to, as he put it, ‘ensure that the Numbers released are HONEST and ACCURATE.’ But other economists have questioned Antoni’s partisanship and suitability, with some observers raising concerns around his earlier comments such as ‘DOGE needs to take a chainsaw to the BLS’ or his suggestion that monthly jobs reports be suspended.
Despite the president’s claims of ‘rigged’ data, there is no evidence of interference in BLS’s survey-driven process. But the exclusion of the commissioner from the process until data is finalized is merely a norm and could face pressure under new leadership. Regardless, a former BLS chief appointed by Trump warned that McEntarfer’s removal ‘undermines credibility’ in the bureau and paves the way for suspicions of political influence.
McEntarfer’s firing builds on what looks like a longer-term campaign to exert control over government data. This has included removing experts who advise on statistical measures, cutting government surveys, replacing the government’s top statistician, and demanding a mid-decade census to exclude those without legal status.
