Trump's economic record shows inflation resurgence and diverging fortunes amid tariffs and Iran war
While inflation briefly cooled after Trump took office, geopolitical shocks and tariff policies have driven prices back up, creating a K-shaped economy where wealthy investors prosper while most Americans report financial strain.
What happened
Trump entered his second term in January 2025 with inflation at 3%, which fell to 2.3% by April 2025. However, after Trump imposed tariffs on US imports, inflation climbed back to 3% in September 2025. Following pauses and legal challenges to the tariffs, inflation declined to 2.4% in early 2026, but the Iran war and resulting closure of the Strait of Hormuz—through which a fifth of global oil passes—drove inflation back above 3.4%, reaching 4.2% in May. Gas prices rose dramatically, averaging $4.32 per gallon nationally in mid-October, nearly $1.30 higher than a year prior, with California paying $6.21 per gallon and Texas $3.81. The job market added only 181,000 jobs in 2025 compared with 2.2 million in 2024, though unemployment remained just above 4%, creating what economists call a "low-hire, low-fire" economy. The stock market surged, driven largely by AI investment, benefiting top 1% shareholders who own nearly half of all stock market investments.
Context
Most Americans report struggling with the current economic conditions despite Trump's claims of economic strength. A Harris poll found nearly two-thirds of Americans believe the country is experiencing a recession, with 83% citing gas prices as a major financial pain point and one-third saying a single unexpected bill could devastate their finances. The divergence between asset-market gains and consumer hardship reflects a K-shaped economy where wealth concentration increases while everyday Americans face tightened budgets from sustained price pressures. Interest rates, which began at 4.25-4.5% in January 2025 and were initially being reduced by the Federal Reserve, were paused amid tariff uncertainty but resumed declining in fall 2025, though geopolitical shocks have complicated the Fed's inflation-management calculus.