The ‘America First’ Economy in 2025: An Analysis of the Trump Administration’s Economic Policies and Outcomes

by Gemini 2.5 Pro, Deep Research. Warning, LLMs may hallucinate!

The 2025 Economic Landscape: Stated Goals vs. Measured Outcomes

The second Trump administration was inaugurated on January 20, 2025, inheriting an economy characterized by resilient growth, low unemployment, and persistent, though declining, inflation.¹ The administration’s economic platform, articulated during the campaign and formalized upon taking office, centered on a dual mandate: restoring American industrial sovereignty through protectionist trade policies and, simultaneously, alleviating the cost-of-living pressures on American households.³

An analysis of the first ten months of the administration reveals a period of intense policy implementation, marked by significant legislative victories, a radical reorientation of U.S. trade policy via executive power, and a deliberate political confrontation that culminated in the longest government shutdown in U.S. history.

The economic effects of these measures are complex and deeply contradictory. The administration has successfully executed its core political agenda, but the economicconsequences of these actions are often in direct conflict with one another. This report analyzes the measures that have had a positive effect on the U.S. economy and those that have had a negative effect, concluding with an overall judgment on the administration’s economic prowess.

The Administration’s Stated Economic Agenda

The administration’s economic philosophy was formally established on its first day in office. The January 20, 2025, Presidential Memorandum “America First Trade Policy” laid out a plan for “transformational change necessary to reverse our country’s economic decline” and instructed federal agencies to “undertake rapid, unprecedented work to put America First on trade”.³

This “America First” doctrine was built on four central, and at times conflicting, pillars:

1. Combating Inflation and Enhancing Affordability: The administration’s most prominent public-facing goal was to “make America affordable again”.⁴ In his inaugural address, President Trump pledged to “direct all members of my cabinet to marshal the vast powers at their disposal to defeat what was record inflation and rapidly bring down costs and prices”.⁵ This was a consistent theme, with the president promising as late as January 7, 2025, “I think you’re going to see some pretty drastic price reductions”.⁴

2. Unleashing American Energy: The primary mechanism for achieving affordability was identified as domestic energy production. The administration views high energy costs as a key driver of inflation.⁵ To counter this, the president immediately declared a “national energy emergency” ⁵, issuing executive orders to “unleash America’s affordable and reliable energy” ⁷ and promote a policy of “drill, baby, drill”.⁵ The stated goal was to use America’s “liquid gold” to lower prices, refill the Strategic Petroleum Reserve, and spur a manufacturing renaissance.⁵

3. Broad-Based Tax Reduction: A central fiscal objective was the renewal and expansion of the 2017 Tax Cuts and Jobs Act (TCJA).⁴ This was framed as a populist measure, with promises to create “no tax on tips” and other breaks for the middle class.⁴

4. Protectionist Trade Reform: The administration’s most radical policy departure was its plan to fund its tax cuts. In a January 5, 2025, social media post, the president stated the tax cuts “will all be made up with tariffs, and much more, from countries that have taken advantage of the U.S. for years”.⁴ This set the stage for a new “External Revenue Service” to collect “massive amounts of money pouring into our treasury coming from foreign sources”.⁶

This agenda established a foundational, first-order conflict that has defined the economic trajectory of 2025. The administration simultaneously vowed to lower prices and “end inflation” ⁴ while proposing to pay for its fiscal agenda with tariffs.⁴ This is a critical incoherence; a wide consensus of economic analysis demonstrates that tariffs are, by definition, a tax on domestic importers and consumers, which raises prices.⁶Models from J.P. Morgan projected the tariff policy would boost consumer prices by 1.0-1.5% ¹¹, and the St. Louis Federal Reserve calculated that tariffs were responsible for a significant share of recent core inflation.¹² The administration’s two core policies—affordability and protectionism—are thus working in direct opposition, creating a “push-pull” effect on the U.S. economy.

The Macroeconomic Scorecard (Through Q3 2025)

The economic data from the first three quarters of 2025 provide a volatile and complex backdrop for these policy battles. It is crucial to note that this official data stream largely ceases after September, a crisis detailed in the following section.

• Gross Domestic Product (GDP): The U.S. economy experienced extreme volatility in the first half of the year. The first quarter of 2025 saw real GDP contract at an annual rate of 0.6%.¹³ Pro-administration analysts from the Heritage Foundation argued this headline number was misleading, claiming that “a quick glance under the hood shows the data points to a much stronger economy than the headlines suggest”.¹⁵ This was followed by a sharp rebound in the second quarter, with real GDP increasing at an annual rate of 3.8%.¹³ The Bureau of Economic Analysis (BEA) noted this increase was “primarily reflected a decrease in imports, which are a subtraction in the calculation of GDP, and an increase in consumer spending”.¹⁴

• Inflation (Consumer Price Index): The administration’s primary target, inflation, has proven “sticky” and remains well above the Federal Reserve’s 2% target.¹⁷ The year-over-year CPI increased from 2.9% in August 2025 to 3.0% in September 2025.¹⁸ Core inflation, which strips out food and energy, also stood at 3.0% in September.¹⁹ Inflation nowcasts from the Cleveland Federal Reserve for October and November 2025 suggest the rate remains lodged at approximately 2.9% to 3.0%.²¹

• Labor Market: The labor market stabilized but showed signs of softening. The unemployment rate, after hitting 4.1% in June, rose to 4.2% in July and 4.3% in August 2025.²² Monthly job growth moderated from an average of 55,000 per month in the second quarter to 51,000 per month in July and August.²⁴ In a November 3 statement, the Treasury Department noted this moderation was driven by two administration policies: “the shedding of federal government jobs” (a “pro-efficiency” goal) and, critically, “Forced deportation and voluntary self-deportation of illegal immigrants has reduced labor supply”.²⁴

Financial Markets and Trade: Financial markets have been highly reactive to policy. The S&P 500, which started the year around 6,040 (Jan 31) ²⁵, experienced sharp sell-offs, such as a nearly 700-point Dow drop in March after the administration’s tariff plans were “taken at its word”.⁴ However, the market has trended upward, closing October at 6,840 ²⁵, buoyed by the prospect of deregulation and tax cuts.²⁶ The trade deficit, a key target of the administration, remains vast. The goods and services deficit was recorded at $78.3 billion in July ²⁷ and an advance estimate of $85.5 billion in August.²⁸

The “Data Vacuum”: A Crisis of Measurement

Any economic analysis of 2025 is fundamentally compromised by a critical, self-inflicted event: the 43-day federal government shutdown that began in early October and ended on November 13, 2025.³³

This shutdown, the longest in U.S. history ³³, created an “unprecedented data vacuum” ³⁰ by shuttering the primary statistical agencies of the U.S. government. The Bureau of Economic Analysis (BEA) and the Bureau of Labor Statistics (BLS) ceased operations, halting the collection, processing, and release of all major economic indicators.²⁹

The negative impact of this “data blackout” ³⁵ is profound. Key economic reports for October and the third quarter, including the official Q3 GDP estimate, the October jobs report, and the October CPI and PPI reports, were indefinitely postponed.³⁰ The consequences are severe:

• Permanent Data Loss: The BLS relies on in-person data collection for much of the CPI ³¹ and the household survey for the unemployment rate. Experts have warned that because of the shutdown’s length, the October 2025 unemployment rate may be permanently lost, and the October jobs data will be a “partial blind spot in America’s official record”.³¹

• Blinding Policymakers: This data vacuum has forced the Federal Reserve and other policymakers to “fly blind”.³⁵ Fed Chair Jerome Powell described the situation as “driving in the fog” ⁴⁰, as the central bank must make critical interest rate decisions without reliable data on inflation or employment.³⁵

• Undermining the Administration’s Narrative: The shutdown has created a severe political problem for the administration itself. Pro-administration voices at the Heritage Foundation and America First Policy Institute (AFPI) wish to claim the economy is “soaring”.⁴¹ However, the shutdown literally stopped the official scorekeepers from publishing the data. This allows the economic narrative to be defined not by official data, but by the “affordability problems” ⁴³ and rising costs that voters feel—a narrative that polls show is blaming the administration’s own policies.⁴³ The data vacuum represents a prioritization of political brinkmanship over the fundamental tools of economic measurement and management.

The “One Big Beautiful Bill Act”: A Victory for Growth or a Fiscal Reckoning?

The administration’s signature legislative achievement in 2025 was the “One Big Beautiful Bill Act” (OBBBA), a sweeping reconciliation bill passed along partisan lines ⁴⁵and signed into law on July 4, 2025.⁴⁶ This legislation serves as the central vehicle for the administration’s fiscal agenda, combining traditional supply-side tax cuts with new populist spending priorities and offsets.

Its allies, such as the America First Policy Institute, have celebrated the OBBBA as “the largest tax cut and pro-business legislation in American history”.⁴⁹ However, non-partisan analyses project it will add trillions to the national debt, creating a sharp conflict between its positive short-term stimulus and its negative long-term fiscal and economic drag.⁵¹

Positive Effects: Pro-Growth Supply-Side Reforms

The primary positive economic effect of the OBBBA is the policy certainty it provides for business investment, combined with targeted tax relief for individuals. The law’s proponents, such as the Tax Foundation, praise its focus on “neutrality and stability”.⁵⁴

Corporate and Investment Stimulus:

The most significant pro-growth elements of the OBBBA are structural changes to the business tax code:

• Permanence for TCJA Provisions: The law makes permanent several key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire, including the lower individual income tax rates.⁴⁷

• Pro-Investment Expensing: Critically, the OBBBA permanently restores 100% bonus depreciation for qualified investments ⁵⁵ and permanent expensing for domestic research and development (R&D).⁵⁴ The Tax Foundation identifies these expensing provisions as having the most “bang for the buck” for economic growth, as they eliminate a tax penalty on capital investment and provide the certainty needed to boost long-run investment.⁵⁴

Individual and Populist Tax Cuts:

The bill also includes several new, high-visibility tax cuts aimed at the administration’s political base:

• “No Tax on Tips” and “No Tax on Overtime,” which are implemented as new tax credits.⁴⁹

• A new, temporary deduction for seniors (age 65 and older) of up to $6,000, which phases out at higher incomes.⁴⁸

• A new, temporary deduction for interest paid on car loans (up to $10,000) for personal-use vehicles, also subject to income phase-outs.⁴⁸

Positive Economic Projections:

Supporters of the bill project significant macroeconomic benefits. The Tax Foundation’s General Equilibrium Model estimates the OBBBA will increase long-run GDP by 1.2%.47 Pro-administration sources, such as Rep. Randy Feenstra, cite White House Council of Economic Advisers estimates of a short-run GDP boost of over 5% and the creation of 4 million jobs in the long run.58 More moderate analyses, such as from Ameriprise Financial, concur that the law “should offer a modest boost to growth” in the intermediate term, particularly in 2026.56

The political architecture of the bill is notable. It successfully merges the priorities of traditional “establishment” Republican supply-side economics (permanent expensing, lower corporate rates) with new “populist” nationalist policies (targeted cuts for tips/overtime, paid for by repealing “Green New Deal” subsidies ⁵⁹ and cutting social programs ⁶⁰). While the pro-investment elements provide a clear positive effect by stabilizing business investment expectations ⁵⁴, other analysts view the populist elements as “political carveouts” that “further complicate the tax code”.⁵⁷

Negative Effects: The Long-Term Fiscal and Distributional Drag

The positive short-term stimulus from the OBBBA is modeled to come at an exceptionally high long-term cost, representing a significant negative effect on the nation’s fiscal health and long-term economic trajectory.

Massive Deficit Impact:

The OBBBA is, fundamentally, a massive, unfunded tax cut. The administration’s claim that it would be paid for by tariffs 4 has been analyzed as insufficient and economically damaging in its own right (see Section III).

• The Congressional Budget Office (CBO), as analyzed by the Committee for a Responsible Federal Budget (CRFB), estimates the OBBBA will increase borrowing by $4.1 trillion through 2034.⁵³

• The Tax Policy Center (TPC) projects a nearly identical $4.2 trillion increase in federal debt by 2034.⁵²

• The Tax Foundation projects a conventional revenue reduction of $5.0 trillion over the decade.⁴⁷

Long-Term “Crowding Out” and Slower Growth:

Multiple independent economic models show the short-term gains are reversed over time as the massive increase in public debt “crowds out” private investment.

• The Yale Budget Lab, in a detailed analysis of the enacted bill, projects that “in the long run, real GDP growth slows because of the debt load”.⁵¹ The mechanism is straightforward: massive government borrowing “drives up interest rates” and “results in crowding out” of the private investment the bill’s expensing provisions were designed to encourage.⁵¹

• This “crowding out” effect means the positive GDP boost is “short-lived”.⁵¹ The Yale model projects an average 0.2 percentage point boost to GDP from 2025-2027, but this gain is erased as the Federal Reserve is expected to raise interest rates to combat the bill’s inflationary impulse and as the national debt accumulates.⁵¹

• The long-term fiscal picture is projected to be dire. The TPC model shows the debt-to-GDP ratio climbing to 126% by 2034.⁵² The Yale Budget Lab’s long-run forecast, accounting for macroeconomic effects, projects the debt-to-GDP ratio will reach 194 percent in 2054.⁵¹

Regressive Distributional Effects:

The benefits of the OBBBA are heavily skewed toward high-income households, while its offsets—spending cuts—disproportionately harm low-income households.

• The Tax Policy Center notes the bill “disproportionately benefits high-income households, who tend to save rather than spend extra income,” which tempers the short-term economic boost.⁵²

• The bill’s “offsets” include “remaking the nation’s fiscal, social and defense priorities” ⁶⁰ by cutting social programs. This includes expanded work requirements for the Supplemental Nutrition Assistance Program (SNAP) ⁶⁰ and, most significantly, $840 billion in cuts to Medicaid.⁶¹ The CBO estimates these Medicaid changes alone will increase the number of uninsured Americans by 7.8 million.⁶¹

Perhaps the most stark analysis comes from the Yale Budget Lab, which performed a combined distributional analysis of the OBBBA and the administration’s 2025 tariffs.⁶²The finding is a profound negative for the administration’s “affordability” agenda: “For all income groups except the top decile, the combination... will reduce after-tax-and-transfer incomes on average.” The bottom 10% of households are projected to see an average income reduction of 7% ($2,700), while the top 10% see an average increase of 1.5% (nearly $8,000).⁶²

The Global Tariff Offensive: Revenue Windfall or Economic Drag?

The administration’s most disruptive and economically significant policy has been the unilateral imposition of a global tariff regime, executed under its “America First Trade Policy”.³ This policy has positive and negative effects that are in sharp, direct conflict.

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